The Mantra on Wall Street Is ‘Don’t Fight the Fed’, but Do You Know What the Fed Is Doing? And Where Did Belgium Get $141 Billion to Purchase U.S. Treasury Bonds?

via chycho


The main mantra on Wall Street is ‘Don’t Fight the Fed’, implying that if monetary policy is geared towards easing – lowering of interest rates – then riskier markets are the game in town, and if monetary policy is geared towards tightening – rising interest rates – then volatile markets are to be avoided. But do we know what the Fed is up to?

I. DOW, S&P 500, QE, and Tapering

Both the DOW and S&P 500 are sitting at all-time highs. Since bottoming out in early March 2009 (DOW, S&P 500), the DOW is up approximately 150% and the S&P 500 approximately 180%. Astronomical returns no matter what period you compare this to.

It’s no secret that the only reason the markets have been soaring is because of unlimited quantitative easing [QE], i.e., stimulus, stimulus, and indefinite-stimulus – “fundamentally a regressive redistribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy.”

By December 2012, funds were being pumped into the markets to the tune of $85 billion a month – a last resort, desperate measure that the FOMC began so that their ‘growth’ targets could be met. This was tapered down to $65 billion a month in June 2013, which resulted in a major sell off in the markets – “the stock markets dropped approximately 4.3% over the three trading days” – prompting the Fed to “hold off on scaling back its bond-buying program”, underscoring the fact that the Fed still has Wall Street’s back and is still in the business of transferring wealth from Main Street to Wall Street.

click to enlarge – source

After the initial shock that ‘free’ money was going to be less readily available subsided and the markets stabilized, the tapering continued; “after three additional reductions, the program currently stands at $45 billion per month. Fed Chairman Janet Yellen expects the program to wind down steadily through 2014 and conclude by year-end, assuming the economy remains healthy.”

The FOMC will likely continue to taper the pace of its asset purchases by a further $10 billion — split equally between Treasuries and mortgage-backed securities — as hinted at in Chairman Bernanke’s press conference following the December meeting. While the Committee has taken pains to note that the path of asset purchases is ‘not on a preset course,’ a substantial change in the outlook would likely be required for the Fed to either pause or accelerate the gradual pace of tapering started at the last meeting. We think this relatively high bar has not been met, some weaker recent data notwithstanding. Based on a roughly $10 billion per meeting tapering schedule, the last QE3 purchases should occur in October 2014.”

II. The Fed and Belgium

But all is not as it appears. According to Paul Craig Roberts and Dave Kranzler, “The Fed Is The Great Deceiver” – it has not been tapering, but pumping more funds into the markets than ever before….

[continued at chycho]

9 Comments on "The Mantra on Wall Street Is ‘Don’t Fight the Fed’, but Do You Know What the Fed Is Doing? And Where Did Belgium Get $141 Billion to Purchase U.S. Treasury Bonds?"

  1. I liked some analogy I heard someone use on here. What the FED is doing to the economy is like trying to keep a ship thats sinking a float by bailing water out on one deck and dumping it onto another deck.

    • Number1Framer | May 26, 2014 at 7:47 pm |

      If you bail it out to higher and higher decks, could you at some point have a chance to finally bail it overboard (if you don’t become so top heavy you capsize first)? What I’m saying is I like the analogy. lol

  2. BuzzCoastin | May 26, 2014 at 5:30 pm |

    “The Economy” is beyond human understanding
    aMerkins, Wall Street, Duh Fed, Economic gurus are all clueless chimps
    butt these chimps can play with hypoticated financial time bombs
    with no downside whatsoever
    they can always bet the farm and lose
    because their too big to jail and
    they control the game.. for now
    eventually Humpty falls

    • InfvoCuernos | May 26, 2014 at 6:51 pm |

      Its like reading a foreign language-I know its vitally important to understand, but I can’t make it more than a few words into this dense jargon before my eyes cross. I am sure this is by design, just like “legalese”, the average native isn’t meant to understand the language of the treaty they are forced to sign on to. Terms and conditions may apply to your colonization.

      • If I remember correctly there is actually a law that says all proposed bills have to be written in the “language of the laws.” This is obviously done intentionally to keep people confused and ignorant and about the law and its the same reason a law that would take a paragraph to explain is turned into a 400 page document because they know most people wont read 400 pages of stuff written in this type of wording to find a piece of information they are looking for.

        • 400 pages? When we refinanced our house, our paperwork was 5″ high. Did we read all of it? Ha! Some of it was four-five copies of the same damn thing and we needed a magnifying glass to read any of it. We just sighed ‘n’ signed.

    • Good. Can’t fall soon enough for many of us.

  3. BuzzCoastin | May 26, 2014 at 5:40 pm |

    Both the DOW and S&P 500 are sitting at all-time highs… the DOW is up approximately 150% and the S&P 500 approximately 180%.

    98% of all stock trades are done by high speed trading computers
    algorithms control the Shit & Piss 500 and the rest
    funny it’s only 180%

  4. Maybe Aaron, you are expecting too much at one time. People all over the world are whittling away at that foundation a little at a time. Then comes the day when the wind is just right . . .

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