Wednesday, April 25, 2012


The  provider is still here trying to figure out what is wrong with the connection but we'll try to see if we can get this written before the gremlins take over once again.

It was Open Market Committee time in D.C. today and the results were pretty much as expected albeit with a tweek here and there.  Finding the economy still operating below peak performance, the Fed announced that interest rates would probably remain unchanged through 2014 but there was more universal agreement on the probable need to tighten in that period.  Of course the stock market liked that and the inflation forecast which held below 2% on average.  Lovely.

Funny thing is I can't really see what these guys are looking at because every time I'm sent out by management to buy stuff I spend more money...especially on food, nevermind petrol.  As I carry on through life I ask myself more and more why anyone cares about "core inflation" which takes into account all that doesn't count in the living of life.  I guess there's a reason but that is a concept in which I place less and less trust.  But if one believes in living life through fictional accounts there is an advantage interest rates are allowed to remain at historic low levels while wages remain depressed signaling, I guess, that the good times are not just around the corner.  Unfortunately, I ask myself, self, how are we going to grow our way out of this thing which if you take all this into account and factor in the automatic tax increases that happen January 1, 2013 leads me to answer, we aint.  Which aint good.

Poor Bernanke.  Everyone is looking to him to pull the cat out of the bag but there's no cat and there may not even be a bag.  I suppose he can try QE III, or IV, or V in a classic attempt to inflate our way out of this box but that Little Paulie Krugman would love, but that would certainly lead to higher interest rates (they're coming anyway but that's for another time) and withing this conundrum lies the oft-forgotten fact that in the past 4 years the national debt has grown to 15 TRILLION dollars all of which has been financed on a relatively short basis.  I think the last number that I remember for interest payable yearly comes to around $500 billion, although don't quote me.  That's with a 10 year note at 2.00% mas o menos.  What happens if interest rates double or for that matter begin to approach "historic" levels either through deliberate inflationary policies or simply by the actions of the bond markets?  For the years I probably have left I could do it on my head I suspect, but I wonder what an effect a scenario such as the one I have just outlined will really have?  To be a bit understated, I am troubled.  But Ben soldiers on, never speaking of the elephant in the room and viewing the future as nothing more than a mere extention of the past.  But these press conferences are great, aren't they?  More disclosue, more transparency.  The Pols and the talking heads love it.  Imagine, the Head of the Federal Reserve Bank of the United States, standing before us, turning on the light and opening the an empty room.

No comments:

Post a Comment