Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Gold Stocks Vs Gold – Not A Good Bet - 15th Dec 19
Silver Price Remains in 'Corrective Downtrend' - 15th Dec 19
Amazon - Snow Falling Effect Christmas Lights Outdoor Projector Review - 15th Dec 19
How to FIX Dirty Disk Windows Hard Drive Volume Error 0X80071AC3 - 15th Dec 19
Raffaele Riva and AUREA Are Breaking New Ground in Financial Services Across Europe  - 15th Dec 19
Canadian Cannabis Stocks CRASH as Canopy Growth Hits a Dead End - 14th Dec 19
Retail Sector Isn’t Dead, and These 6% Dividend Paying Stocks Prove It - 14th Dec 19
Top 5 Ways to Add Value to Your Home - 14th Dec 19
Beware Gold Stocks Downside - 13th Dec 19
Fed Says No Interest Rate Hikes In 2020. What About Gold? - 13th Dec 19
The ABC’s of Fiat Money - 13th Dec 19
Why Jo Swinson and the Lib Dems LOST Seats General Election 2019 - Sheffiled Hallam Result - 13th Dec 19
UK General Election 2019 BBC Exit Poll Forecast Accuracy Analysis - 12th Dec 19
Technical Analysis Update: Tadawul All Share Index (TASI) - Saudi Arabia ETF (KSA) - 12th Dec 19
Silver Miners Pinpoint the Precious Metals’ Outlook - 12th Dec 19
How Google Has Become the Worlds Biggest Travel Company - 12th Dec 19
UK Election Seats Forecasts - Tories 326, Labour 241, SNP 40, Lib Dems 17 - 12th Dec 19
UK General Election 2019 Final Seats Per Party Forecast - 12th Dec 19
What UK CPI, RPI INFLATION Forecasts for General Election Result 2019 - 11th Dec 19
Gold ETF Holdings Surge… But Do They Actually Hold Gold? - 11th Dec 19
Gold, Silver Reversals, Lower Prices and Our Precious Profits - 11th Dec 19
Opinion Pollsters, YouGov MRP General Election 2019 Result Seats Forecast - 11th Dec 19
UK General Election Tory and Labour Marginal Seats Analysis, Implied Forecast 2019 - 11th Dec 19
UK General Election 2019 - Tory Seats Forecast Based on GDP Growth - 11th Dec 19
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19

Market Oracle FREE Newsletter

UK General Election Forecast 2019

Is all this Fed Central Bank Exit Strategy Talk Warranted?

Interest-Rates / US Interest Rates Feb 19, 2010 - 12:33 AM GMT

By: Tim_Iacono

Interest-Rates

Best Financial Markets Analysis ArticleBoy, for a group of policymakers at the nation's central bank who, in a best case scenario, are going to just sit on their hands for at least the rest of the year, there sure has been a lot of talk about an "exit strategy".


That is, how the Federal Reserve plans to withdrawal the trillions of dollars in asset purchases, emergency lending facilities, and liquidity measures that have been undertaken over the last year that purportedly saved us from another Great Depression.

While it's probably a good idea to begin thinking about this sort of thing, the way Fed chief Ben Bernanke and others at the central bank have been talking lately, you'd think that the economy is about ready to fire on all cylinders again and that there's a pressing need to begin dialing back on some of the aid they've been providing.

What they should probably be worried about instead is the massive wave of foreclosures now washing up onto shore and the waning inventory rebuilding cycle that, when combined, will require more assistance in the form of money printing in the year ahead, not less.

Just this morning, Philadelphia Federal Reserve Bank President Charles Plosser said that he would favor selling some of the $1.25 trillion in mortgage-backed securities that have been piling up on the Fed's balance sheet "sooner rather than later", as if, he really thinks that the economic recovery we've been experiencing over the last six months - built mostly on government bailouts and handouts - is going to last.

Last week, it was Chairman Ben Bernanke who detailed a plan to Congress that would have the central bank adjusting the interest paid on "excess reserves" - money held by member banks at the Fed - in order to keep credit from expanding too rapidly and realizing the worst of the inflation hawks' fears - runaway inflation.

Shouldn't the question of what will happen to the market for home loans when the Fed stops their monthly purchases of between $60 to $100 billion worth of mortgage-backed securities next month be a more pressing concern?

Sure, they now own a considerable amount of the souring mortgage debt in the U.S., but they'll probably have to buy at least another trillion dollars or so to keep the housing market propped up, that is, unless there is some other plan in the works where, with their loss limits recently removed, wards of the state Fannie Mae and Freddie Mac can take on the job.

[The graphic above is from Standard and Poor's report on troubled mortgages]

Goldman Sachs weighed in last week with something about the Fed not raising interest rates until 2012 and there are more than a few who think that we'll be turning Japanese this decade in a very big way, as in, ZIRP (Zero Interest Rate Policy) for as far as the eye can see.

Maybe all this talk about "exit strategies" is simply a way for policymakers to generate confidence that might not otherwise be there.

For example, anyone looking at consumer spending, consumer confidence, or the unemployment rate could easily come to the conclusion that we've got a long way to go before the economy begins to grow again in any substantive sort of way.

But, if they were to listen to the Federal Reserve talking about how they're going to get out of the business of printing money on a scale never before seen by Mankind, then maybe they'll think that, just maybe, the Fed knows something that they don't know.

Then again, the more likely explanation is that economists at the central bank are just as clueless about where the economy is headed today as they were a few years ago before we all experienced the worst financial market crisis and the sharpest economic contraction since the end of World War II.

In case anyone needs to be reminded, here's what Fed chief Ben Bernanke thought about the economy and financial markets back in the middle of the last decade.

Why are we still listening to this guy?

Is there any reason to think that he'll do any better in this decade than he did in the last one?

Isn't this talk of the Fed's "exit strategy" way too premature?

By Tim Iacono
Email : mailto:tim@iaconoresearch.com
http://www.iaconoresearch.com
http://themessthatgreenspanmade.blogspot.com/

Tim Iacano is an engineer by profession, with a keen understanding of human nature, his study of economics and financial markets began in earnest in the late 1990s - this is where it has led. he is self taught and self sufficient - analyst, writer, webmaster, marketer, bill-collector, and bill-payer. This is intended to be a long-term operation where the only items that will ever be offered for sale to the public are subscriptions to his service and books that he plans to write in the years ahead.

Copyright © 2010 Iacono Research, LLC - All Rights Reserved

Tim Iacono Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules