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Eric Stoner
03-07-2012, 10:39 AM
and you've been wrong every time you explained it.

Just because you say so, right ? lol.

eagle2
03-08-2012, 08:27 PM
Unlike you, I present facts to support my claims.

eagle2
03-08-2012, 11:12 PM
Even the Cato Institute sees supply and demand as the reason for the high price of oil.

http://www.cato.org/publications/commentary/its-not-obamas-fault-crude-oil-prices-have-increased

Eric Stoner
03-09-2012, 10:36 AM
Yes. Yes. YES ! Supply and demand is the primary force driving up oil prices. Nobody ever said it wasn't. But when you add in all the aggravating factors like suppressing domestic drilling, holding up the Keystone pipeline, speculators , instability in the Middle East AND a weak dollar, then it's not hard to figure out why gas is going for $4 a gallon and climbing.

eagle2
03-12-2012, 10:01 PM
If we're suppressing drilling, why has our oil production increased over the past three years?

Water is still more important than oil. The proposed route for the Keystone pipeline runs along aquifiers that provide one third of the population of Nebraska with water.

Melonie
03-13-2012, 03:30 AM
If we're suppressing drilling, why has our oil production increased over the past three years?

Because new drilling permits for oil on private land, which were approved under the previous administration, have eventually resulted in large amounts of new oil production - much of it from the Bakken shale.

Eric Stoner
03-13-2012, 06:16 AM
Because new drilling permits for oil on private land, which were approved under the previous administration, have eventually resulted in large amounts of new oil production - much of it from the Bakken shale.

He is obviously totally unfamiliar with what has been happening in North Dakota.

I should have said : " suppression of drilling on PUBLIC land ".

jimboe7373
03-13-2012, 06:33 AM
We can drill all we want and build as many pipelines as we want. Until you get lobbyists and speculators out of the equation we are not going to have fair or market related oil prices. Remember how the Iraq war was going to give us much cheaper gas?.

Eric Stoner
03-13-2012, 08:46 AM
We can drill all we want and build as many pipelines as we want. Until you get lobbyists and speculators out of the equation we are not going to have fair or market related oil prices. Remember how the Iraq war was going to give us much cheaper gas?.

As much as I'd like to, we can't discuss this aspect without violating the "politics ban".

eagle2
03-21-2012, 08:34 PM
Yes. Yes. YES ! Supply and demand is the primary force driving up oil prices. Nobody ever said it wasn't. But when you add in all the aggravating factors like suppressing domestic drilling, holding up the Keystone pipeline, speculators , instability in the Middle East AND a weak dollar, then it's not hard to figure out why gas is going for $4 a gallon and climbing.

Below is a graph showing the historical price per gallon of gasoline in the US:

http://66.70.86.64/ChartServer/ch.gaschart?Country=Canada&Crude=f&Period=36&Areas=USA%20Average,,&Unit=US%20$/G

and here is a graph showing the historical price per liter of gasoline in Canada in Canadian currency:

http://66.70.86.64/ChartServer/ch.gaschart?Country=Canada&Crude=f&Period=36&Areas=Canada%20Average,,&Unit=CAN%20c/L

and the following page shows the historical price of gasoline in Britain, in British currency:

http://www.staveleyhead.co.uk/utilities/petrol-prices/

Suppressing domestic drilling, holding up the Keystone pipeline, AND a weak dollar, do not affect the price of gasoline in Canada or Britain. Canada and Britain do not use US currency. The US government cannot suppress drilling in Canada or Britain, yet the price of gasoline has increased in both countries since 2009, just like in the US. The increase in the price of gas in Canada is practically the same as in the US. Seems that the facts contradict Eric's claims, based on his right-wing ideology, that the high price of gas is being caused by the Fed's low-interest, weak dollar policies and US government suppression of drilling.

Melonie
03-22-2012, 02:19 AM
^^^ as discussed ad nauseum in the past, supply and demand for oil are now globalized. And while there is some spread in refining costs based on regional refining capacity versus regional demand for gasoline, the 'lion's share' of the cost of gasoline ( ex taxes ) stems directly from oil prices. Thus it's not surprising to see that gasoline prices in the US, Canada and the UK ( ex taxes ) do track each other with a fairly high degree of correlation. As to the difference in currencies, the relative exchange rates of the USD versus CAD versus UK pound, over the past 3 years at least, have not really moved all that much ... at least when compared to the Swiss Franc or Euro or Yen. Arguably, this is NOT a random coincidence.

Put another way, try making the same graphical gasoline price comparison between California and New Jersey ... which both price gasoline in US dollars !

Eric Stoner
03-22-2012, 06:48 AM
^^^ Oil is priced in DOLLARS ! Not Yen; Not Canadian Dollars; Not the Pound; in DOLLARS. Weak U.S. Dollars = higher prices for oil and other commodities.

Melonie
03-22-2012, 09:26 AM
^^^ at least until Iran just became the latest oil exporter to try and break the US dollar oil pricing monopoly.

The fact that oil has been exclusively priced in US dollars on a worldwide basis in the past is the reason that relative currency exchange rates have been the only truly significant variable for oil / gasoline prices in different countries. The US dollar, the Canadian dollar, and the UK pound, have more or less 'tracked' each other over the course of the past few years ( within a few percent ), something that is NOT true of the Euro, the Yen etc. Granted that where the UK is concerned, a regional premium for Brent crude comes into play. And of course taxes applied to gasoline vary widely from country to country ( as well as from US state to US state ).

eagle2
03-22-2012, 04:19 PM
^^^ Oil is priced in DOLLARS ! Not Yen; Not Canadian Dollars; Not the Pound; in DOLLARS. Weak U.S. Dollars = higher prices for oil and other commodities.

Gasoline is priced in LOCAL CURRENCY at the gas station. When you go to a gas station in Canada, the prices at the gas station are in CANADIAN DOLLARS. When you buy gas in Britain, the prices at the gas station are in BRITISH POUNDS.

eagle2
03-22-2012, 04:21 PM
^^^ at least until Iran just became the latest oil exporter to try and break the US dollar oil pricing monopoly.

The fact that oil has been exclusively priced in US dollars on a worldwide basis in the past is the reason that relative currency exchange rates have been the only truly significant variable for oil / gasoline prices in different countries. The US dollar, the Canadian dollar, and the UK pound, have more or less 'tracked' each other over the course of the past few years ( within a few percent ), something that is NOT true of the Euro, the Yen etc. Granted that where the UK is concerned, a regional premium for Brent crude comes into play. And of course taxes applied to gasoline vary widely from country to country ( as well as from US state to US state ).

Since early 2009, the Canadian dollar has gone up in value from approximately $.80 to approximately $1.00.

Melonie
03-23-2012, 02:04 AM
^^^ technically correct, but in reality a short-lived 'blip' in the chart that occurred immediately after the 2008 'crash' and lasted for less than 6 months. It also occurred at a time where demand for oil and gasoline fell precipitously ( resulting in a gasoline price level under $2 per gallon ). Both before and after the 2008 'crash', the longer term average Canadian exchange rate has hovered just shy of $1.00. This makes the $.80 Canadian exchange rate example an outlier.

http://finance.google.com/finance/chart?q=CURRENCY:CADUSD&tkr=1&p=5Y&chst=cob

Melonie
03-26-2012, 07:36 AM
an update from the Chairman ... with 'translation' ... from


(snip)"While it appears to us that Bernanke's message was loud and clear, there are those who need validation and peer-confirmation. Such as that from the firm whose alumni run the Fed, namely Goldman Sachs. Below is Jan Hatzius' take on the "surprising" Chairman speech which essentially said QE can and will come at any time there is a downtick it the market, masked by the unemployment rate rising to its fair value, as estimated by Gallup, somewhere around 9%.

From Goldman Sachs:

BOTTOM LINE: Fed Chairman Bernanke argued that the outperformance of labor market indicators recently may reflect a “catch-up” from unusual weakness in jobs during the recession. By implication, continued declines in unemployment will require faster GDP growth in the future. He also continued to argue that most of the increase in long-term unemployment is cyclical rather than structural in nature. Chairman Bernanke’s read on the state of the labor market was consistent with an accommodative stance for monetary policy—though he did not directly call for additional easing.

MAIN POINTS:

1. Federal Reserve Chairman Ben Bernanke spoke on recent labor market developments before the annual meeting of the National Association for Business Economics (NABE) today. His comments focused on two aspects of the current debate on the labor market: (1) the outperformance of labor market data relative to GDP growth; and (2) how much of the increase in long-term unemployment reflects cyclical rather than structural factors.

2. Chairman Bernanke discussed three alternative explanations for the better performance of labor market indicators recently. First, the surprisingly large drop in the unemployment rate may reflect statistical noise, and that GDP could be revised higher in the future. However, he said that there is no specific evidence to support this conclusion at this point, and in fact Gross Domestic Income (GDI)—an alternative measure of aggregate activity—was weaker than GDP over the last year. Second, the decline in the unemployment rate could be overstating the improvement in the labor market, as the drop partly reflects potential workers exiting the labor force. However, Chairman Bernanke argues that the decline in broader measures of labor underutilization (he cites the BLS’s U-5 measure) casts doubt on this explanation. Third, the large decline in the unemployment might reflect “a catch-up from outsized job losses during and just after the recession”. Chairman Bernanke ultimately finds this argument most compelling, and presents some simple supporting evidence.

3. The chairman’s comments on the recent decline in the unemployment thus cut two ways. On the one hand, the drop in the unemployment rate is likely a real and encouraging development. On the other hand, because the outperformance compared to GDP likely reflects a catch-up from past weakness then, in Chairman Bernanke’s words, “further improvements in unemployment will likely require faster economic growth than we experienced during the past year”.

4. The second portion of the Chairman’s speech focused on whether the increase in long-term unemployment reflected cyclical or structural factors. Consistent with his existing views, Chairman Bernanke argued that elevated structural unemployment is mostly a cyclical phenomenon, and that structural factors can explain only a small (and possibly temporary) part of the increase.

5. On monetary policy, the Chairman said that faster growth—perhaps needed to see further declines in unemployment—“can be supported by continued accommodative policies”. He also argued that because the increase in long-term unemployment was primarily cyclical, “then accommodative policies to support the economic recovery will help address this problem as well”. These statements were not necessarily calls for additional easing, but they clearly supported the Fed’s current accommodative stance."(snip)


Of course, by 'pure coincidence', the US dollar's exchange rate is down, the price of gold is up, US stock market futures are up, the price of oil is up etc. following Ben's announcement !

eagle2
03-26-2012, 08:48 AM
^^^ technically correct, but in reality a short-lived 'blip' in the chart that occurred immediately after the 2008 'crash' and lasted for less than 6 months. It also occurred at a time where demand for oil and gasoline fell precipitously ( resulting in a gasoline price level under $2 per gallon ). Both before and after the 2008 'crash', the longer term average Canadian exchange rate has hovered just shy of $1.00. This makes the $.80 Canadian exchange rate example an outlier.

http://finance.google.com/finance/chart?q=CURRENCY:CADUSD&tkr=1&p=5Y&chst=cob

The graph showing the historical price of gasoline begins in early 2009, which is about the same time the exchange rate for the Canadian dollar was $.80. During the timespan of the graph showing the historical price of gas in Canada, the value of the Canadian dollar increased from approximately $.80 to approximately $1.00. Therefore, according to Eric's ideology, the price of gasoline in Canada should have gone down during this time period. Again, the facts contradict Eric's ideology.

Melonie
03-26-2012, 09:03 AM
^^^ at the bottom line, a 20% swing in relative currency exchange rates is easily overwhelmed by the 120% swing in crude oil prices which took place over the same time period.

http://www.instituteforenergyresearch.org/wp-content/uploads/2010/06/us-gasoline-crude-oil-prices-chart.jpg

Obviously, this older graph also shows that the EIA blew the hell out of their cost 'projections' heading toward 2012 !!!


Attempting to circle back on the main topic, analyst Graham Summers offers a similar 'take' on the most recent FED policy statement ... from his weekly newsletter


(snip)"Graham Summers' Free Weekly Market Forecast (a Tenuous Balance is in Place)

The markets will likely try to rally this week based on the following items:

1) End of quarter performance gaming

2) Last week's weak stock performance

3) Angela Merkel signaling that Germany will increase the pointless "firewall" around Europe's banking system

4) Bernanke's hint that more QE is coming in April in this morning's speech

#1 is a regular phenomenon in the markets and needs not be explained. #2 is closely tied in with the latest policy of verbal intervention on the part of the Fed: any time stocks weaken some Fed official, usually Charles Evans of Chicago or Bill Dudley of New York, gives a speech suggesting more easing is just around the corner and VOOM! stocks take off again. "(snip)

(snip)"Finally, Bailout Ben Bernanke just hinted at more QE in his speech at the National Association for Business Economics this morning. With gas prices at $4 and food prices not far off from their all time highs, I cannot see how Bernanke can possibly unveil more QE without unleashing major political outrage and destroying Obama's chances at re-election (Obama did re-elect Bernanke as Fed Chairman).

So I view this hint as more posturing from Bernanke. He likely is aware that seasonal adjustments have made all economic data from the last three months look better than reality and is simply trying to prep the markets for what's likely going to be a slew of bad data started in 2Q12. We also have to note that stocks took it on the chin last week, so Bernanke could very well be maintaining item #1 on the list above: verbally intervening to keep the markets up."(snip)


The unstated point of course is that, also going along with additional fed easing ( a.k.a. money printing ), is additional decline in the US dollar exchange rate as well as a further increase in global commodity prices. But a FED refusal to ease, in the face of the 'less than rose colored' hard US economic data now starting to surface, is likely to encourage another economic downturn. Thus the FED is rapidly running out of 'room to maneuver'.

Eric Stoner
03-26-2012, 12:21 PM
The graph showing the historical price of gasoline begins in early 2009, which is about the same time the exchange rate for the Canadian dollar was $.80. During the timespan of the graph showing the historical price of gas in Canada, the value of the Canadian dollar increased from approximately $.80 to approximately $1.00. Therefore, according to Eric's ideology, the price of gasoline in Canada should have gone down during this time period. Again, the facts contradict Eric's ideology.

Because the strength ( or weakness ) of the U.S. Dollar is A factor, not THE factor in oil prices. Oil is not priced in Canadian dollars so your fixation on the Canadian dollar is clearly misplaced.

eagle2
03-26-2012, 01:37 PM
Gasoline is priced in Canadian dollars at gas stations in Canada.

Melonie
03-26-2012, 02:36 PM
^^^ actually, Canadian ICE traded crude oil and gasoline are still priced in US dollars !!! You are at best semi-correct about the rest. Retail Canadian gas stations price gasoline based on the US dollar denominated price of commodity gasoline converted to Canadian dollars at a near current exchange rate ( based on delivery delays ), plus Canadian taxes and retailer profit margin priced in Canadian dollars. Thus only a portion of the Canadian gas pump price is 'free' of the US dollar denominated price of oil / gasoline.

Eric Stoner
09-14-2012, 11:09 AM
QE 1 did not work.
QE 2 did not work.
QE 3 will not work.

The Fed will be spending ( printing ) $40 billion a month to buy mortgage bonds from the big banks. That will drive down interest rates and the banks are SUPPOSED to lend out the cash from the bond sales to businesses and the economy will grow. Arguably QE 1 and 2 kept things from getting worse but neither program did a thing to create significant, sustained economic growth. The problem is that many of the businesses with the credit rating to borrow are not doing so.Why ? Because they don't know what is going to happen to their taxes or health care costs. And the banks are not too hot to lend either when they get a guaranteed and safe return on their investment by buying U.S. debt. And do the banks really need the help ? e.g. J.P. Morgan Chase has already recovered from its multi-billion "Whale Trade" losses.
BOA is doing fine.

The Fed is already holding $2 trillion worth of securities of varying quality. Some of it is even U.S. debt. It already has total liabilities of $2.9 trillion.

Another supposed objective of this nonsense is to help the housing market. How and why ? Because Ben says so ? But 30 year fixed rate mortgages are AVERAGING 3.81 % and haven't been above 5 % since 2010. So don't worry if you are scratching your head. Nobody else has figured out and can explain this one either.

"But Eric, the Dow soared after Ben's announcement ". Yes it did. Ben also announced that short term interest rates ( the only ones the Fed has any control over ) will stay near zero into 2015 so the only place investors have to get any return is the stock market. At some point Ben and the Fed will have to reverse course and start contracting the money supply and raising short term rates. When he does the increased " wealth " in stocks will disappear and so will economic growth.

What if instead of buying bonds from the big banks , the Fed just sent out checks for $1000 to 40 million taxpayers ? Or $2000 checks to 20 million ? Every month until further notice ? Oh that's right, we tried that under Bush and earlier in Obama's term. That didn't work.
Why not buy 800,000 Volts and either give them away or better yet, raffle them off to the highest bidders ?
It doesn't matter. Those "modest proposals" will not work any better long term than what the Fed is doing now.

mikef
09-14-2012, 02:39 PM
Like all the previous money printing.... It only helps those closest to the money creation..... The 1% do well..... The 99% don't see any improvement in their lives.... Bernanke can talk all he wants about these fed actions helping with job creation.... But when you see and hear him say it.... You can see he doesn't believe it.... Worse than that, you can practicially see, and smell the fear in him..... God knows if there is a rush out of the currency & Treasuries he will experience the mother of all Maalox moments.

Melonie
09-14-2012, 04:14 PM
^^^ please don't even think it ( a rush out of the US dollar ) !!! Arguably, Bernanke is taking a calculated risk that he can help America very gradually 'stiff' her creditors ( i.e. China, Japan, Saudi etc. ) via very gradual US dollar devaluation, without precipitating 'dumping' of too many of the US dollars currently held by those creditors. I suppose this is analogous to the famous 'slowly boiling the frog' ... as long as Ben can prevent the Chinese / Japanese / Saudi 'frog' from jumping out of the pot ...

Melonie
09-14-2012, 04:55 PM
Bank of America just came out with this analysis ... from


(snip)"Bank of America's Priya Misra has just released an analysis which is identical to ours in all other respects, except for when the latest QE version would end. BofA's take: "We do not believe there will be “substantial” improvement in the labor market for the next 1.5-2 years and foresee the Fed buying Treasuries after the end of Operation Twist." What does this mean for total Fed purchases? Again, simple. Add $1 trillion to the Zero Hedge total of $4TRN. In other words, Bank of America just predicted at least 2 years and change of constant monetization, which would send the Fed's balance sheet to grand total of just over $5,000,000,000,000 as the Fed adds another $2.2 trillion MBS and Treasury notional to the current total of $2.8 trillion. "(snip)

(snip)"Or, in terms of US GDP, the Fed's balance sheet will have "LBOed" just shy of 30% of all US goods and services.

It gets worse:

Since the Fed is effectively becoming the marginal player in both the MBS and Treasury markets, a very relevant question is how much private market debt is left to sell. Short answer: not much. According to BofA's calculation, the Fed will own more than 33% of the entire mortgage market by 2014.

That's half the story.

On the Treasury side, in just over 2 years, "Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014." You read that right: in just over 2 years, the Federal Reserve will hold two thirds of the entire bond market with a maturity over 5 years (which by then will be part of the Fed's ZIRP commitment, yield 0% and essentially be equivalent to cash).

No wonder that David Rosenberg is worried that the Fed will soon run out of securities to buy (well, there are always equities of course, but the Fed will not monetize those until some time in 2015 when hyperinflation is raging).

And speaking of hyperinflation (and our earlier note that nothing "else is equal") the real question is if indeed the Fed will own $5 trillion in "assets" in 27.5 months, what does that mean for gold and crude? The answer is plotted below:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/09/20120914_5Yn_1.png

In case it is unclear, the answer is:

•$3350 gold
•$190 oil.

Luckily the Fed has already factored all these soaring input costs (and "alternative money" prices) in its models, and there is nothing to worry about. Lest we forget, the Fed can crush inflation cold in 15 minutes cold... somehow. Even when unwinding its balance sheet would mean sacrificing 30% of US GDP and, let's be honest about it, civil war. "(snip)

Eric Stoner
09-17-2012, 06:48 AM
^^^ please don't even think it ( a rush out of the US dollar ) !!! Arguably, Bernanke is taking a calculated risk that he can help America very gradually 'stiff' her creditors ( i.e. China, Japan, Saudi etc. ) via very gradual US dollar devaluation, without precipitating 'dumping' of too many of the US dollars currently held by those creditors. I suppose this is analogous to the famous 'slowly boiling the frog' ... as long as Ben can prevent the Chinese / Japanese / Saudi 'frog' from jumping out of the pot ...

Obviously Ben wants to keep those frogs in the pot until it is too late.

Generally I agree with Milton Friedman who long advocated replacing the Fed with a computer programmed to print that amount of money necessary to increase the money supply by about 2 % a year.

The Fed has two missions : 1. Maintain our currency as a store of value and 2. maintain employment. By trying to do the latter it is failing in its primary mission. Worse yet, it has crossed over from monetary policy to fiscal policy where it does NOT belong at all. That ought to be the sole purview of Congress and the Prez. Huh ? What ? "Eric, how is the Fed messing around with fiscal policy ? " Simple. By buying up U.S. debt and enabling spendthrift spending. In addition the Fed is assuring that an enormous part of our Federal budget goes to pay interest on all that debt.

I would argue that if the Fed had focused on its primary mission and maintained the value of our currency it would have done more to promote employment than all of its "twists" and "easings".

jammerchell
09-28-2012, 12:52 AM
It is a common sense that gold is very percious and now more and more people like the gold metal, and more and more people now join ge group of hunting for treasure and gold. This is like the "gold rush". But what is different form before is that now people use more advanced equippmemt to help them to find the gold. And it seems among different equippments, people like the most, because that such a device can help them to identify the detail information of the metal so that people can find it in a short time.

Melonie
09-28-2012, 02:37 AM
^^^ while recent 'prospecting' efforts have indeed increased, from a real world prospective more gold was 'lost' to world supply due to this week's South African miner's strike than will be added back by a full year's worth of all of the shipwreck salvage and new Arctic gold 'prospecting' efforts combined.

Eric Stoner
09-28-2012, 07:41 AM
There is a BIG difference between linking Fed policy to gold and backing our currency with gold. I favor the former and oppose the latter. It is tempting I know to wish for a return to the gold standard. However the gold standard comes with its own set of problems and it was one of the prime causes of the Great Depression.

It is far better I submit ( and I am joined in this by a LOT of prominent folks with more experience and expertise than I ) to link our currency to the price of gold i.e. to let gold help set its value. Or we can use a "basket of commodities" including gold to do the same thing. The object is the same i.e. to control and prevent wild expansions ( or even contractions ) in our money supply. If nothing else it would refocus the Fed on its prime mission which is to maintain the value of our money.

jammerchell
10-05-2012, 03:09 AM
There are many types of detectors in the market, so it is really hard to make a decision which one to buy and whee to buy. I searched the internet for a long time and then I bought a , which is really helpful. And when I do metal detecting outside it can really distinguish what kind of the metal that it has detected and give an indication for me. And by using such kind of device I have saved a lot of time and energy. In a word, I love the gold metal detector and have confidence in it.

Kingfounds
12-10-2012, 11:57 PM
In your opinion, what can the gold metal detectors help you? In fact, on one hand it can help you to make your road of treasure hunting more fluently and bring you more surprise. Besides on the other hand it can also help people in other fields and aspects. For example by using the the archologist can know the position of the metal items more clearly so that they wonn't do damaged to teh treasures when they do the digging. And in your daily life if you lost your ring and other metal items. The gold metal detectors can also help you to find it. Really useful, doesn't it?

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12-11-2012, 03:23 AM
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Melonie
12-13-2012, 05:06 PM
the FED 'gravy train' for the too big to fail banks a.k.a. 'Primary Dealers' continues ...


(snip)"The Fed today elected to print an additional $45 billion a month via outright purchases of Treasuries. That’s in addition to the printing of $40 billion a month via MBS purchases that it is already doing. It will also continue to reinvest the proceeds of maturing MBS. That’s been running at $35-$40 billion per month. At that rate the Fed will be pumping at least $120 billion per month into the trading accounts of the Primary Dealers. This total is as high as during QE 1 in 2009. The dealers will use the cash to purchase more Treasuries, which will partly fund the Treasury debt. Other buyers will continue to fund the rest.

The dealers will also deploy the cash in other trades, including some MBS purchases in addition to the Treasury purchases, but also purchases of equities and commodities.

The Fed has created a Catch 22 for itself by tying the Fed Funds rate to “expected” inflation. Its language was as follows.


In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal…


The Fed published a table and charts summarizing the economic projections and the target federal funds rate projections made by Federal Reserve Board members and Federal Reserve Bank presidents for the December 11-12 meeting of the Committee. I assume that the inflation contingency is based on these projections. The FOMC and district presidents saw no likelihood of inflation reaching beyond 2%. Not now. Not ever. Let me say that again, just to make sure it’s not a typo. The Fed governors and bank presidents didn’t see inflation surpassing 2%, EVER. Projections materials (PDF)

But what if, as I think highly likely, commodity prices surge as a result of this new round of money printing. Normally, in the short run, commodity price rises do not filter into the inflation measures which the Fed watches. Commodity price inflation could rage without pushing the PCE and core PCE to anywhere near the 2.5% threshold the Fed has set.

That has the potential to wreak havoc in the economy without raising employment levels at all. Manufacturers, middlemen and consumers would be squeezed by rising food and energy costs well before the Fed had any inkling of an increase in the tortoise like PCE measures. The cost squeeze would force consumers to cut back on spending, and manufactures, distributors and retailers to cut back on employment. Inflation would stop economic growth in its tracks, all the while the Fed is peering into its crystal balls a year or two ahead and seeing no inflation.

Then, as the economy ground to a halt, what would the Fed do? Stop QE because commodity inflation was crushing the economy? At that point that would run the risk of exacerbating the contraction. Print even more money, driving commodities up even faster? In truth, if commodities do go into bull mode, the Fed would seem to have no way out.

With the expansion of QE, the Fed has created a potential nightmare scenario, one that I think is all too likely."(snip)

from

Eric Stoner
07-14-2017, 11:19 AM
More proof that the Fed does not have a clue what it is doing :The Fed has consistently signaled that it will continue to raise interest rates but NOBODY has any idea WHY. The economy is still very weak. One theory pushed by John Crudele and a few others is that the Fed is raising rates so that it can lower them when the economy gets into real trouble further down the line. A related theory is that the Fed is raising rates out of concern for "irrational exuberance " in the stock market.

In her latest Congressional testimony, Janet Yellen said that rates won't necessarily rise if inflation does not go up. Inflation goes up when the economy is doing well so some analysts are worried that if we get anything resembling healthy economic growth ( 3 % , 4 % ) the Fed will raise rates. The point is that her recent testimony represents a 180 degree turn from what she has been saying for years. She hinted at rate increases ; then signaled and finally did raise rates. And said that she would continue to do so.

Wall Street must have liked what they heard because the Dow hit yet another record after her latest pronouncements.