Wednesday, January 27, 2016


Nothing.  Which was exactly what we predicted.  The gang shifted the growth language from "strong' to "moderate" (it hasn't been "strong" in 10 years) and acknowledge that there might be a bit of trouble lurking out there in international-land that they will be "monitoring."  As to further rate increases, they didn't say they would...then again, they didn't say they wouldn't  and the DOW crashed well over 200 points.  Everybody walked away from this with the impression that Janet & Co. really don't have much of a clue which is probably far too harsh, but as in most things, perception counts more than reality and it is true in this case.

Now one could argue that the institution has been consistently wrong since 2008 (or long before that) and there could be found a lot of evidence to back that up.  Certainly, the meaningless rate rise of last month was ill-timed stemming from the perceived need that 0-25bp was too low for too long and offered no flexibility for the future, but in that case it should have occurred three months earlier as nothing material could have been expected from the actual move.  The nonsense about "conditions warranted the move" was just that--nonsense.  The job figures were fantasy land and the economic growth figures came out of fairy land.  The talk of "four moves in 2016"...well, I admit I have no idea where that came from but now they are stuck with it and even the thought that it might happen terrifies the equity markets and it is an election year, remember?  Of course they can't say that it will NOT happen because in that case any credibility that remains is out the window...probably for a good, long time.

It is rather curious, however, that everyone seems to have forgotten that the asset purchase program is still roaring ahead with maturities being merrily re-invested and the balance sheet remaining at the four trillion dollar level.  With that kind of liquidity being pumped out what the hell difference does it make if they go up or down a quarter or even half a point?  Beats me.  Nott that it has done a damn bit of good.  Now, what might be the future effect of this bloated pig of a central bank is an entirely different question and I must confess to considerable ignorance as to the answer but in my experience when things get this far out of control (yes, that point is debatable) getting back to normal is not easy and often not pleasant.

And so dear readers, here we are with supposedly the smartest people in the world doing a Bill Clinton and trying to figure out what the word "is" means in the Fed Statement.  A SIGN, A SIGN!  Guess what?  As every day goes by, the Fed and its brothers and sisters around the world will have less influence on the future of the U.S. and the global economy.  Perhaps we can say to them."good job, you held it together," with the recognition that the "fix" wasn't a fix at all but merely an application of tape and bailing wire cleverly, in some cases, applied to a system prone to break-down.
Unfortunately, with all of the other factors to consider, the biggest of all may be those that emerge from this period of political upheaval to be the candidates in the election.  We are living in a world of Black Swans and seven sigmas (whatever those are).  Economic and jobs numbers coming up in the next 10 days.  What a year this could be.  It has not had a good start.

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