{"id":14309,"date":"2015-11-12T07:04:32","date_gmt":"2015-11-12T12:04:32","guid":{"rendered":"http:\/\/olduvai.ca\/?p=14309"},"modified":"2015-11-12T07:04:32","modified_gmt":"2015-11-12T12:04:32","slug":"is-judgment-day-at-hand","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=14309","title":{"rendered":"Is Judgment Day At Hand?"},"content":{"rendered":"

Is Judgment Day At Hand?<\/a><\/h3>\n

What is Judgment Day?<\/strong><\/p>\n

It is like ancient times that the Feds, under Greenspan, somehow decided that US needed to follow a zero interest rate policy, a policy now known as the ZIRP.\u00a0 It was 2008 when Bernanke gave birth to the term Quantitative Easing, QE.\u00a0QE was followed by Operation Twist, and its sequels \u2013 QE2 and QE3.<\/p>\n

The new buzzword is \u201cnormalization\u201d.\u00a0 Normalization is the reversal of the QE operations and the raising of interest rates to above zero.\u00a0 Whether we agree or disagree is irrelevant.\u00a0 The fact is that the BLS just declared the unemployment rate is at 5%, a level that should justify initiating the normalization process starting with the next FOMC meeting in December. In other words, judgment day is at hand.<\/p>\n

\"juday\"Batten down the hatches, judgment day approacheth
\nImage credit:\u00a0World Wrestling Entertainment (WWE)<\/a><\/p>\n

The following two charts summarize the Fed\u2019s policies nicely.\u00a0 The first shows the\u00a0Federal Funds rate<\/a>. It dropped from over 5% in 2007 to zero today.\u00a0 So we are making a big deal over a possible 25 basis points hike?\u00a0 I will leave that question for later.<\/p>\n

\"1-FF<\/a>Effective Federal Funds rate. It may be hiked from nothing to almost nothing soon, but what difference would it really make? \u2013 click to enlarge.<\/p>\n

The second chart shows the\u00a0Fed Balance Sheet<\/a>, also starting in 2007.\u00a0 It went from $875 billion in 2007 to $4.5 trillion today, an increase of $3.625 trillion.<\/p>\n

\"2-Fed<\/a>Total assets held by the Federal reserve. This unprecedented intervention has delivered \u201cthe weakest economic recovery of the entire post-WW2 era\u201d. This result should be no surprise to anyone, except perhaps the monetary mandarins themselves \u2013 click to enlarge.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n

Looking at the two charts above, they beg the question: \u00a0How do you normalize the extreme policies of the last 8 years? \u00a0If normal means a return to a 5% federal funds rate and reducing the Fed\u2019s balance sheet back to under $1 trillion, we have a hell of a long way to go.<\/p>\n","protected":false},"excerpt":{"rendered":"

Is Judgment Day At Hand? What is Judgment Day? It is like ancient times that the Feds, under Greenspan, somehow decided that US needed to follow a zero interest rate policy, a policy now known as the ZIRP.\u00a0 It was 2008 when Bernanke gave birth to the term Quantitative Easing, QE.\u00a0QE was followed by Operation […]<\/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":[5728,39,49,926,260,303,305,431,10569,534,661,662,824,1939],"class_list":["post-14309","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-assets","tag-balance-sheet","tag-bls","tag-employment","tag-fed","tag-federal-reserve","tag-interest-rates","tag-judgment-day","tag-monetary-policy","tag-qe","tag-quantitative-easing","tag-unemployment","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14309","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=14309"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14309\/revisions"}],"predecessor-version":[{"id":14310,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14309\/revisions\/14310"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14309"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14309"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14309"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}