FOMC Minutes: Inflate or Not Inflate; No Exit Strategy; Policy Commode
Minutes of the Federal Open Market Committee's August meeting contain some interesting detail that was not hinted at in the press release.
The great deleveraging continues, as fewer lenders make use of the Federal Reserve's expanded lending facilities:
The Federal Reserve's total assets were about unchanged, on balance, since the Committee met in June, remaining at approximately $2 trillion as the System's purchases of securities were essentially matched by a further decline in usage of the System's credit and liquidity facilities.
In related end-of-credit news, Fitch the other day reported a slight decline in credit card deadbeating:
U.S. consumer credit quality showed signs of life as credit card ABS chargeoffs declined last month, snapping a string of five consecutive record highs, according to the latest Credit Card Index results from Fitch Ratings.
The improvement comes as delinquencies stabilized further and other credit card ABS performance variables exhibited similar positive results. Despite the one-month improvement, most credit card ABS trusts remain pressured from a chargeoff perspective.
Back at the FOMC, there's an argument over whether the Fed should get into the market for adjustable-rate-mortgage backed securities:
Meeting participants again discussed the merits of including agency MBS backed by adjustable-rate mortgages (ARMs) in the Committee's MBS purchase program: Some thought it would be useful to include agency ARM MBS, noting that doing so could reduce the unusually large spreads between ARM rates and yields on similar-duration Treasury securities--spreads that were far larger than the comparable spreads on fixed-rate mortgages; others saw little potential benefit, given the small stock and limited issuance of ARM MBS, and were hesitant to involve the Federal Reserve in another market segment. The Committee made no decision on purchasing ARM MBS at this meeting.
The debate over the Fed's exit strategy is couched in intentionally obscure phrases like "Several participants noted the need to continue refining the Committee's strategy for an eventual withdrawal of policy accommodation." Does that mean those participants want to refine the strategy and withdraw, or were they making the argument to hold off on the withdrawal until the strategy is refined?
Also, what is "policy accommodation?" Here's another reference to it, and here's Theories of Policy Accommodation - The Persistence of Inflation and Gradual Stabilizations by Jose De Gregorio, written in 1992 and still available from the IMF at a deflation-resistant price of $15 a pop.
Disappointingly, the minutes leave out the highlight of the August meeting, when a hapless security guard, alarmed by sounds of orgiastic screaming, entered the meeting room and was torn limb from limb by frenzied Fed revelers, who then mounted his head on a thyrsus.
And here's what passes for the deflation/inflation debate:
Most participants anticipated that substantial slack in resource utilization would lead to subdued and potentially declining wage and price inflation over the next few years; a few saw a risk of substantial disinflation. However, some pointed to the problems in measuring economic slack in real time, and several were skeptical that temporarily low levels of resource utilization would reduce inflation appreciably, given the loose empirical relationship of economic slack to inflation and the fact that the public did not appear to have reduced its expectations of inflation. Participants noted concerns among some analysts and business contacts that the sizable expansion of the Federal Reserve's balance sheet and large continuing federal budget deficits ultimately could lead to higher inflation if policies were not adjusted in a timely manner. To address these concerns, it would be important to continue communicating that the Federal Reserve has the tools and willingness to begin withdrawing monetary policy accommodation at the appropriate time to prevent any persistent increase in inflation.
There's more. Depending on appeals to the recent court ruling ordering the Fed to open its records, we may one day be getting something meatier than this whirlwind of double negatives, passive phrasings and unattributed opinions. Until then, remember that three out of five economists agree that this constitutes "frequent communication with the public" that "ensures Fed accountability."
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is it a FED meeting or a Trent Reznor video ?
"Disappointingly, the minutes leave out the highlight of the August meeting, when a hapless security guard, alarmed by sounds of orgiastic screaming, entered the meeting room and was torn limb from limb by frenzied Fed revelers, who then mounted his head on a thyrsus"
In summation: it is still quite shitty, but improving signs of less shit hitting the proverbial fan(s). Pass them nachos & margaritas
THE ROAD TO HYPER....
Just so we can go along ticking the boxes... obviously it's just an approximation, but it's more or less how it happened in other countries... Weimar/Zimbabwe/Argentina/Brazil/Yugoslavia....
http://en.wikipedia.org/wiki/Hyperin...hyperinflation
---------------
..inject 1 dose of Volcker at any stage (before 8) to avoid going HYPER... side effects include: sharp recession, lost elections, unemployment spike, unpopularity, strikes...
..inject 1 dose of Volcker at any stage (before 8) to avoid going HYPER... side effects include: sharp recession, lost elections, unemployment spike, unpopularity, strikes...
Bernanke tried being Volcker for a while, but he blinked. Before his second term is up, the man is going to go through more character ChchchcChANGes than a mid seventies era David Bowie.
He has a thin white beard.
"meeting particpants discussed at length the placement of deck chairs. The vessel continued to admit seawater through several large gashes across the larger compartments. The members passed a resolution to commend the band for their performance of somber music. "
-jcr
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God damned spammers. Looks like it's time to get a captcha on the H&R comment form, guys.
-jcr
Also, what is "policy accommodation?
I left out the juicy calculus in the middle. YsY for school libraries.
Looks like it's time to get a captcha on the H&R comment form, guys.
A solution that is worse than the problem (at least at this point).
lessee... spammer: spot after 4 words, skip. worst case scenario, skim read waste 3 secs.
captcha: screw H&R! slippery slope! what's next? NYT style moderation? no more swearing'
would lead to subdued and potentially declining wage and price inflation over the next few years; a few saw a risk of substantial disinflation. However, some pointed to the problems in measuring economic slack in real time
Minutes of the meeting are essentially useless. We need a transcript, if not a full YouTube video.
The exit strategy isn't obscure. It's nonexistent. I think they have a dart board with ideas and a few darts.
Debt settlement and mortgage solutions at best. Articles related to financial field like these should not be spammed. Behave guys. just do the behave mode.