Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed a Rudderless Ship?

Interest-Rates / Central Banks Aug 13, 2009 - 02:37 AM GMT

By: Axel_Merk

Interest-Rates

How much excitement can a statement by the Federal Reserve’s Open Market Committee (FOMC) generate? Given that the Fed has been printing over a $1 trillion of fresh currency over the past year, more are indeed taking note when the Fed speaks.


In our assessment, the Fed statement is a compromise of what may be an internal dispute at the FOMC. We are referring to a $300 billion program to buy Treasury Bonds, previously scheduled to run out in September. Buying Treasury Bonds is intended to lower long-term interest rates; and from what we can tell, it is in the Fed’s foremost interest to keep long-term rates low to keep the nascent economic recovery on track.

However, massive financing requirements by the federal government, states, as well as the private sector, not to speak of international public and private issuers, may push the cost of borrowing higher this fall. Alas, the Fed wants to keep some powder dry to intervene in the market.

Trouble is that there’s very little powder left in the approved program. In the past, our Senior Economic Adviser and former St. Louis Fed President William Poole has referred to the Fed’s initiatives akin to sipping from the ocean with a straw. It may not be prudent to open a new box of powder at the last minute, but if the Fed intends to use it, the market should be prepared for it. Hence, it may have made sense to increase the program now.

The committee wanted none of that, yet to admit that something may need to be done, they extended the length of the program without the amount. That’s like saying we keep the bar open an extra couple of hours, but good luck finding any alcohol. With many alcoholics in the room (we are referring to market participants addicted to cheap credit, not Fed officials), we have our doubts they won’t convince the barkeeper (the Fed) to make more cheap booze (currency) available.

All of this may be a prudent tactic. More likely, however, it reflects an internal battle at the Fed, as some are calling for less, others for more cheap credit. Is the Fed becoming a rudderless ship? It may require a crisis to see strong leadership yet again. And another credit crunch we may get if the cost of borrowing goes up.

Of course, we wouldn’t have this discussion if the Fed allowed market forces to play out and weed out the weak players. But the political will to pursue sound monetary policy seems absent all too often as the credit crisis evolves.

Axel Merk
Author of Sustainable Wealth
President and Chief Investment Officer, Merk Investments

This report was prepared by SustainableWealth.org, and reflects the current opinion of the contributor. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. SustainableWealth.org is a trademark of Merk Investments, LLC.

Axel Merk 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