{"id":15455,"date":"2015-12-19T09:39:20","date_gmt":"2015-12-19T14:39:20","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15455"},"modified":"2015-12-19T09:39:20","modified_gmt":"2015-12-19T14:39:20","slug":"the-fomc-decision-us-money-supply-and-the-economy","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15455","title":{"rendered":"The FOMC Decision, US Money Supply and the Economy"},"content":{"rendered":"
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The FOMC Decision, US Money Supply and the Economy\u00a0<\/a><\/h3>\n<\/div>\n
Giving the Kremlinologists Something to Do<\/strong><\/div>\n
\n

As is well known by now, on Wednesday the US central monetary planning bureau finally went through with its threat to hike the target range for overnight bank lending rates from nothing to almost nothing.<\/p>\n

\"2-nauticalmodernboatinterior\"<\/p>\n

Photo credit:\u00a0Luca Brenta<\/a><\/em><\/p>\n

The very next day, the effective federal funds rate had increased\u00a0from 15 to 37 basis points<\/a>\u00a0\u2013 moreover, as illustrated by the trend in short term rates prior to the FOMC meeting, the markets had already fully anticipated the rate hike:<\/p>\n

\"1-short<\/a>US 3-month t-bill discount rate and the one year t-note yield: between the October and December FOMC meetings, the markets fully discounted the impending rate hike. Once again we can see that there is actually a feedback loop between the Fed and the markets, and that it is not true that the Fed has absolutely no control over interest rates (even though the degree of its control is limited) \u2013 click to enlarge.<\/p>\n

Of course,\u00a0some<\/em>\u00a0markets still managed to act surprised (and\/or confused), most prominently the US stock market, which is traditionally the very last market to get the memo, regardless of what is at issue. This is why asset bubbles so often end in crashes \u2013 market participants tend to very \u201csuddenly\u201d realize that something is amiss.<\/p>\n

This time, the trusty WSJ\u00a0FOMC statement tracker<\/a>\u00a0reveals that the planners have given us Kremlinologists something to do, by changing the statement\u2019s content quite a bit. By contrast to the previous carbon copy approach, it tells a completely new story. Well, almost.<\/p>\n

Between the October and the December meetings, the minds of the committee members have evidently experienced a great epiphany. Suddenly they have realized that the economy is indeed\u00a0just awesome.\u00a0<\/em><\/p>\n

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

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

The FOMC Decision, US Money Supply and the Economy\u00a0 Giving the Kremlinologists Something to Do As is well known by now, on Wednesday the US central monetary planning bureau finally went through with its threat to hike the target range for overnight bank lending rates from nothing to almost nothing. Photo credit:\u00a0Luca Brenta The very […]<\/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":[5728,303,8364,305,4512,431,534,6170],"class_list":["post-15455","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-fed","tag-federal-open-market-committee","tag-federal-reserve","tag-fomc","tag-interest-rates","tag-monetary-policy","tag-pater-tenebrarum"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15455","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=15455"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15455\/revisions"}],"predecessor-version":[{"id":15456,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15455\/revisions\/15456"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15455"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15455"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15455"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}