Fed says it’s running out of bullets

[DucatiMonster696]

The clock is ticking and the Fed knows the situation is becoming more and more dire the longer the economy stays in rut despite record low interest rates and their ill advised attempts to at first stimulate the economy via QE. As of today over all unemployment and consumption is nowhere near the levels needed for them to back off their course but they see the looming problems with their balance sheets growing more and more glaring each day and they know they are running out of options.

However the truth today (which even the FED has acknowledge previously) is that QE measures are in now only in place to try to keep our debt sustainable and serviceable long enough for them to make one last ditch attempt to do something, anything to jump start the economy and growth beyond the anemic levels we experienced in 2012.

After they have fired most of their bullets and the economy is no longer responding then they better hope they save that last bullet for themselves as it looks like those who saw inflation winning out might just be correct. Thus if inflation does eventually win then interest rates will climb and mass devaluation of the dollar would have to occur to keep pace with higher interest rates forcing our debt to be extremely difficult to sustain. At the very least 2013 will be a make or break year for the US dollar and in addition to 1st world currencies which are in danger such as the Euro and Japanese Yen. Everything I've read and seen has first world G10 countries having a worth time of it while G20 countries are expected to see good growth.


http://www.marketwatch.com/story/fed-says-its-running-out-of-bullets-2013-01-03?dist=afterbell

By MarketWatch

WASHINGTON (MarketWatch) — For the first time since the financial crisis started five years ago, the Federal Reserve has at last made its first signal that its extraordinary loose monetary policy will start to get tougher.

U.S. Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington December 12, 2012.
To be sure, the change isn’t gigantic. There’s no sense that interest rates will increase from the near zero levels that have lasted for over four years.

And the Fed only last month initiated a new bond-buying program, to top off a plan to add more mortgage-backed securities that had only been around since September.

But, the minutes show, the central bank is starting to say, enough is enough. Of the crowd that supported bond buys, a few say they should continue until the end of the year, and several said it could stop, or slow, well before then. Read more on the Fed minutes.

There are two possible alternatives. One is that the Fed is expecting a big upturn in the economy, so that there just won’t be a need for more juice in the form of bond purchases.

That’s not really the case, however. The Fed only expects the unemployment rate in the mid-7% range by the end of the year, from 7.7% in November. And they don’t forecast any serious inflation issues, either.

So the alternative explanation is that the Fed just doesn’t think there’s much benefit to bond buys for the broader economy. The minutes say the program to buy MBS has been “effective” but also that the benefits were “uncertain” and that risks are growing as the balance sheet rises.

To put it differently: the Fed thinks the economy isn’t that great and there’s very little inflation to worry about, but its primary program to improve the economy doesn’t do very much.

It’s a clear admission the Fed is running out of gun powder. And that’s quite a shot it has fired to the markets.

- Fed becoming worried about stimulus side effects -

http://finance.yahoo.com/news/fed-sticking-asset-buys-despite-190347272.html

 

[s0me0nesmind1]

Remember kids, do shit first - worry about repercussions and all that other BS AFTER. It's just stupid to think of consequences first. Yeaaa.... screw that whole logical conclusions shit.

 

[fskimospy]

Lol. People who wrongly predicted mass inflation for four years and counting say 'no wait, really this time'. Why has your continuing, spectacular wrongness not made you rethink your understanding of economics?

Reality, indeed.

 

[LegendKiller]

OP - your analysis of the statement is quite funny. Funny in that you are completely wrong and your calls for inflation are utterly misguided.

 

[Bitek]

Rant about inflation, link says no sign of inflation...

 

[piasabird]

So the Feds are printing worthless money and then using it to buy back their bonds. How does this help the economy?

What a stupid title for a financial article. They can not lower the interest rates and the dollar is close to being worthless now. Bonds are earning less than 1%, and money in th bank is the same. This is the world the Feds have created. The prime lending rate needs to be slowly raised if the economy is improving. It should be around 4% to make our money worth anything. It is unrealistic to keep a 0% prime lending rate forever. That alone should cause deflation. It says our money is worth nothing.

A little inflation is better than a little deflation. Eventually people will want a raise. The President, the vice, the Justices, and congress all voted themselves a raise.

 

[LegendKiller]

So the Feds are printing worthless money and then using it to buy back their bonds. How does this help the economy?

What a stupid title for a financial article. They can not lower the interest rates and the dollar is close to being worthless now. Bonds are earning less than 1%, and money in th bank is the same. This is the world the Feds have created. The prime lending rate needs to be slowly raised if the economy is improving. It should be around 4% to make our money worth anything. It is unrealistic to keep a 0% prime lending rate forever. That alone should cause deflation. It says our money is worth nothing.

A little inflation is better than a little deflation. Eventually people will want a raise. The President, the vice, the Justices, and congress all voted themselves a raise.

lol.

 

[werepossum]

So the Feds are printing worthless money and then using it to buy back their bonds. How does this help the economy?

What a stupid title for a financial article. They can not lower the interest rates and the dollar is close to being worthless now. Bonds are earning less than 1%, and money in th bank is the same. This is the world the Feds have created. The prime lending rate needs to be slowly raised if the economy is improving. It should be around 4% to make our money worth anything. It is unrealistic to keep a 0% prime lending rate forever. That alone should cause deflation. It says our money is worth nothing.

A little inflation is better than a little deflation. Eventually people will want a raise. The President, the vice, the Justices, and congress all voted themselves a raise.

Actually it's a pretty neat trick. We can't really sell enough bonds to fund our massive debt without paying ruinous interest rates, so we imagine money into existence and then buy our own debt as needed to make up the difference. No other nation could pull this off, which shows that as a nation we aren't quite dead yet.