{"id":15151,"date":"2015-12-10T07:07:57","date_gmt":"2015-12-10T12:07:57","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15151"},"modified":"2015-12-10T07:08:35","modified_gmt":"2015-12-10T12:08:35","slug":"the-feds-painted-itself-into-the-most-dangerous-corner-in-history-why-there-will-soon-be-a-riot-in-the-casino","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15151","title":{"rendered":"The Fed\u2019s Painted Itself Into The Most Dangerous Corner In History\u2014\u2013Why There Will Soon Be A Riot In The Casino"},"content":{"rendered":"
\n

The Fed\u2019s Painted Itself Into The Most Dangerous Corner In History\u2014\u2013Why There Will Soon Be A Riot In The Casino<\/a><\/h3>\n

The chart below crystalizes why the Fed is stranded in a\u00a0monetary\u00a0no man\u2019s land. By the time of next week\u2019s meeting the federal funds rate will have been pinned at about 10 bps, or effectively zero, for\u00a084 straight months<\/strong><\/em>.<\/p>\n<\/header>\n

\n
\n

Yet during that same period, the\u00a0consumer price level has risen by 1.75% per year. And that\u2019s\u00a0if you give credit to all of the BLS gimmicks, such as hedonic adjustments for quality change, homeowners\u00a0\u201cimputed\u201d rents\u00a0and product basket\u00a0substitution, which cause inflation to be systematically\u00a0understated.<\/p>\n

On a basis that is close enough for government work, therefore, the real money market interest rate has been\u00a0negative 2%<\/strong><\/em>\u00a0for seven years. But that\u2019s so crazy, unjustified, and unprecedented that even the Keynesian money printers who run the Fed have run out of excuses.<\/p>\n

Presumably, Yellen and her posse know that we did not have seven years running of negative real\u00a0money market rates even\u00a0during the Great Depression of the 1930s.<\/p>\n

So after one pretension, delusion, head fake\u00a0and forecasting error after another, the denizens of the Eccles Building have painted themselves into the most dangerous monetary corner in history. They have left themselves no alternative except to provoke a riot in the casino\u2014\u2014-the very outcome that has filled them with fear and dread all these years.<\/p>\n

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

Indeed, Yellen and Bernanke before her have made a huge deal out of communications clarity and forward guidance. But how do you explain to even the credulous gamblers and day traders on Wall Street that the business cycle has not been outlawed and that free money can not last forever, world without end?<\/p>\n

Likewise, after all these years of saying that the dollar\u2019s exchange rate is the responsibility of the US Treasury\u2014 and that the Eccles Building only does domestic monetary policy\u2014\u2013 how will the Fed heads\u00a0explain that they have wrapped themselves around the axle of an unrelentingly\u00a0strong dollar?<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Fed\u2019s Painted Itself Into The Most Dangerous Corner In History\u2014\u2013Why There Will Soon Be A Riot In The Casino The chart below crystalizes why the Fed is stranded in a\u00a0monetary\u00a0no man\u2019s land. By the time of next week\u2019s meeting the federal funds rate will have been pinned at about 10 bps, or effectively zero, […]<\/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":[5144,6122,3598,2120,10975,303,305,383,431,534,4069],"class_list":["post-15151","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bernanke","tag-casino","tag-contra-corner","tag-david-stockman","tag-dollar-exchange-rate","tag-fed","tag-federal-reserve","tag-great-depression","tag-interest-rates","tag-monetary-policy","tag-yellen"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15151","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=15151"}],"version-history":[{"count":3,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15151\/revisions"}],"predecessor-version":[{"id":15154,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15151\/revisions\/15154"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15151"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15151"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15151"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}