operation twist

The Fed Focuses on the Unemployed

federal reserve buildingThe FOMC just did a great thing. The Federal Reserve tied interest rates and quantitative easing to U.S. labor. The messaging alone is powerful. The Federal Reserve is saying, very clearly, U.S. workers matter. Businesses need to start hiring and increasing wages if they want to actually improve the overall economy.

About 5 million people—more than 40 percent of the unemployed—have been without a job for six months or more, and millions more who say they would like full-time work have been able to find only part-time employment or have stopped looking entirely. The conditions now prevailing in the job market represent an enormous waste of human and economic potential.

The FOMC set out specific parameters to the ongoing QE3.

$2.6 Trillion for 2 Million Jobs

bernake say whatAnyone find these economic stimulus packages put out by the government and the Federal Reserve ridiculous at this point?  The reality is a direct jobs program would be much cheaper and much more effective to get the economy moving.   Yet, magically that idea has been dismissed and worse since 2008.

Fire in the Jackson Hole - Bombastic Stimulus Claims

Federal Reserve Chair Ben Bernanke will do more quantitative easing. That's the consensus from his Jackson Hole speech.   As usual, the utterances on labor are ignored by Wall Street or in this case, used to justify Wall Street's crack addict quantitative easing fix.

The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.

Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

Bernanke is justifying this action through various studies claiming quantitative easing generated jobs.

The Fed Keeps Twisting and Tells Us the Economy is in the Wind

twistThe Federal Reserve will extend their Operation Twist past the June 2012 deadline and downgraded the economic outlook. Originally Operation Twist was $400 billion in Treasuries that were maturity dates of 3 years of less turned into T-bills with maturity dates of 6 to 30 years.

Here is the twist details from the NY Fed:

We Told Ya So - FOMC Minutes Confirm No Quantitative Easing

We told ya so, yet people don't listen. The Federal Reserve FOMC meeting minutes were released and showed no quantitative easing for you.

Here is the money shot from the FOMC minutes:

A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.

The FOMC has 10 voting members. The news is clear, those in favor or more quantitative easing are now 8 to 2 and if and only if the economy goes further into the tank.

Nevertheless, the staff continued to forecast that real GDP growth would pick up only gradually in 2012 and 2013, supported by accommodative monetary policy, easing credit conditions, and improvements in consumer and business sentiment

We're sure some will hold out hope against hope that more quantitative easing will happen. After all there are two members of the FOMC leaving the door open on more quantitative easing if the unemployment situation gets worse. That said, the next time you see some major investment group claiming QE3 is sure to arrive, check their interests and why that group is making such a claim. Alternatively just read us, we sure knew QE3 was not gonna happen.

Here Come Commodities on Fire - Thank You Federal Reserve

tin man blows topQuantitative Easing rumors are now spreading like wildfire. Speculators have already grabbed one commodity, tin.

Tin climbed the most in almost four months in London as prospects of low U.S. interest rates at least until 2014 boosted speculation of increased demand for the metal used in mobile phones, plasma screens and cars.

Gold bugs are also going nuts and most commodities have jumped in prices, almost overnight.

There was a one two three punch by the Federal Reserve. First the FOMC announced uber-low interest rates until 2014.

The Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

Let's Twist Again

As most econo-geeks know by now, the Federal Reserve is monetizing treasuries in an effort to lower interest rates, which in theory should encourage people to borrow and spend.

“The Fed’s monetization of government borrowing is in economic terms a hugely powerful liquidity tool,” said Lena Komileva, head of Group of Seven market economics in London at Tullett Prebon Plc, the world’s second-largest interdealer broker. “It also helps to address investor fears, by depressing government yields and private sector borrowing costs and signaling a firm commitment by the Fed to keep monetary liquidity flowing for a long time.”

The problem is that Treasury yields actually increased last week, despite massive purchases by the Fed.