Friday, May 24, 2013

The Federal Reserve's new whiz-bang - - -

"Forward Guidance" is the FED's main new whiz-bang financial manipulation toy. Here's what they themselves say about it - - -

With short-term interest rates at the zero lower bound, forward guidance has become a key tool for central bankers, and yet we know little about its effectiveness. Standard medium-scale ...models tend to grossly overestimate the impact of forward guidance on the macroeconomy -- a phenomenon we call the "forward guidance puzzle." The Forward Guidance Puzzle - Federal Reserve Bank of New York

So, basically, they don't know what the un-fuck they're doing with something that "has become a key tool for central bankers."

"Forward guidance" is just FED spokes-folks publicly explaining what they think they're going to do. Before this, it was unofficial, minor, and called "jawboning." Before that, the FED kept everything hidden as if they were bluffing in a high-stakes poker game.

So the future of the fiat-based world economy hangs on something of which the FED admits, "we know little about its effectiveness," our "models tend to grossly overestimate the impact," and in fact, "forward guidance" is a "puzzle."


I've fallen and I can't get up - - -


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Saturday, May 04, 2013

Where all the inflation has gone - - -

The U.S. Federal Reserve (the FED), in addition to setting interest rates to the lowest in history, is creating $85 billion in money-equivalent every month by buying various bonds. This is all inherently inflationary, but so far, not much inflation is showing up in the U.S. economy. Why not?

Because for the time being, it's going elsewhere - - -
Brazilian President Dilma Rousseff criticized U.S. monetary policy saying it has harmed Brazil and other developing countries. Rousseff said the U.S. decision to leave benchmark lending rates near zero has created an overload of speculative money that floods into economies like Brazil.
Brazilian President Dilma Rousseff: "Such expansionist monetary policies in and of themselves, is isolation, regarding the fiscal policies, ultimately lead to a depreciation in the value of the currencies of developed countries thus impairing growth outlooks in emerging countries." --Democracy NOW! Headlines, Tuesday, April 10, 2012

And here - - -   

Annual [Argentine] inflation, clocked by private analysts at over 20 percent... --Argentine leader's image falls as inflation soars | Reuters

Now we have this logical evolution:

Brazilian authorities are likely to tighten monetary policy faster than expected to combat resurgent inflation ...the central bank's monetary policy committee will hike rates by at least 25 basis points to 7.5% when it meets on Wednesday.
"We have passed the point of no return," said Marcelo Carvalho head of Latin America economic research at BNP Paribas, who predicted a 50 basis point hike. "Inflation has been too high too long and it's time to wake up." Brazil poised to hike rates: analysts | LatinFinance

But hey, what's a little more Krugmanite collateral damage among friends?


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