{"id":13974,"date":"2015-10-31T06:34:06","date_gmt":"2015-10-31T11:34:06","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13974"},"modified":"2015-10-31T06:34:06","modified_gmt":"2015-10-31T11:34:06","slug":"dear-janet-seriously","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13974","title":{"rendered":"Dear Janet, Seriously!!"},"content":{"rendered":"

Dear Janet, Seriously!!<\/a><\/h3>\n

The Fed’s con<\/strong>fidence trick this week was, once again, the\u00a0Keyser Soze gambit<\/em>\u00a0(via Beaudelaire)-\u00a0\u00a0“convincing the world of Yellen’s hawkishness, when no such character trait exists.”<\/em>\u00a0However, unlike the movies, stocks and FX markets have already seen through the con, leaving Fed Funds futures alone to believe the hype.\u00a0As we noted previously,\u00a0“The Fed Can’t Raise Rates, But Must Pretend It Will,”<\/em><\/strong><\/a>\u00a0repeating its pre-meeting hawkishness to dovishness swing time and again in a “Groundhog Day” meets “Waiting For Godot”-like manner.\u00a0Time is running out Janet, tick tock…<\/em><\/strong><\/p>\n

This is what we are to believe a “data-dependent” Federal Reserve is thinking…<\/p>\n

\"\"<\/a><\/p>\n

Source: @Not_Jim_Cramer<\/em><\/a><\/p>\n

And for now,\u00a0F<\/em>ed Funds Futures are falling for it…<\/p>\n

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 <\/p>\n

But the broad equity markets aren’t…<\/p>\n

\"\"<\/a><\/p>\n

Nor are Financials…<\/p>\n

\"\"<\/a><\/p>\n

And nor is The Dollar…<\/p>\n

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Because, as we noted previously,<\/a>\u00a0the market (and The Fed) know perfectly well that raising short-term rates would be like taking away the punch bowl just as the party gets going.<\/strong><\/em>\u00a0As rates rise, the economy\u2019s production and employment structure couldn\u2019t be upheld. Neither could inflated bond, equity, and housing prices. If the economy slows down, let alone falls back into recession, the Fed\u2019s fiat money pipe dream would run into serious trouble.<\/p>\n

This is the reason why the Fed would like to keep rates at the current suppressed levels. A delicate obstacle to such a policy remains, though:\u00a0If savers and investors expect that interest rates will remain at rock bottom forever, they would presumably turn their backs on the credit market. The ensuing decline in the supply of credit would spell trouble for the fiat money system.<\/em><\/strong><\/p>\n

To prevent this from happening, the Fed must achieve two things<\/strong>.<\/p>\n

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First<\/em>, it needs to uphold the expectation in financial markets that current low interest rates will be increased again at some point in the future. If savers and investors buy this story, they will hold onto their bank deposits, money market funds, bonds, and other fixed income products despite minuscule yields.<\/div>\n<\/blockquote>\n
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…click on the above link to read the rest of the article…<\/p>\n<\/div>\n

 <\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Dear Janet, Seriously!! The Fed’s confidence trick this week was, once again, the\u00a0Keyser Soze gambit\u00a0(via Beaudelaire)-\u00a0\u00a0“convincing the world of Yellen’s hawkishness, when no such character trait exists.”\u00a0However, unlike the movies, stocks and FX markets have already seen through the con, leaving Fed Funds futures alone to believe the hype.\u00a0As we noted previously,\u00a0“The Fed Can’t Raise […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[10332,303,305,1154,451,2151,4318],"class_list":["post-13974","post","type-post","status-publish","format-standard","hentry","category-economics","tag-expectations","tag-fed","tag-federal-reserve","tag-interest-rate-policy","tag-janet-yellen","tag-monetary-easing","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13974","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13974"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13974\/revisions"}],"predecessor-version":[{"id":13975,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13974\/revisions\/13975"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}