As I wrote yesterday morning, there was no rate rise but Fed chief Janet Yellen put the bond vigilantes on notice that the October meeting is in play for rate rise.
As I have been writing all year, there will be no rate change this year, since the US banks balance sheets are in such dire straits due to plenty of bad paper still sitting on their books, they can’t sustain a price hit on the “assets” of US treasuries propping up the banks that was put there by the Fed in the form of excess reserves. I believe this to be true, but no one wants to admit it.
All the banks once-profit centers have been taken away by regulation. The prop trading, gone. Commodities trading, gone. Bond trading and mortgage writing cut to bits.
Since the Fed believes everything else is fine, it must be the black hole sitting on the bulge banks balance sheets.
Yellen said in her statement: Employment is getting stronger and wages are growing, both of which are shades of the truth if not outright lies.
The Fed chief did cited China’s equity plunge and its economic slowdown as major concerns for them standing pat at zero.
Since when do we need an all-clear from China or Greece (which was the cause for the delay in June.)?
Yellen also said in her statement there is little inflation, which is a concern to the Fed, but should not be for any of us. The last thing the Fed can fight is a deflationary cycle at this point.
Besides saving $3.00 on a fill up at the gas station, when most of the items we buy has either gone up in price or became smaller at the same price is inflation. It’s just not tracked by the Fed.
Eighty months at zero interest rates. A crisis rate has now be in place during all of Obama’s presidency.
Zero rates — as a friend put it — is like watering your lawn with a fire hose.
Well here’s to the Fed. Jawboning its way to nowhere as October looms on the horizon. All trick, not treat.