Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Federal Reserve Propping Up Asset Prices

Stock-Markets / US Federal Reserve Bank Jun 21, 2013 - 01:58 PM GMT

By: Fred_Sheehan

Stock-Markets

The Federal Reserve is fully committed to its asset-propping strategy: It will raise the economy by lifting asset numbers.

This is where it is important to remember the Federal Reserve does not care about economics. The economists at the Fed are central planners. It's not that they don't like economics, they simply are not interested in, so ignore, economics. Those of us not so inclined think of asset numbers as prices, be they shares in the S&P 500 or wheat germ. But the Fed operates in an abstract world; humanity is a distraction.


At the moment, the Fed's asset-lifting model deigns that the economy, which is a derivative of asset-lifting, will pass muster when the S&P 500 rises another 500 points and house prices rise another 11%.

Buy NowThese numbers have been typed into the Fed's model. It summons variables to achieve those levels. One supposes the waning influence of QE (looking at the increasing units of QE needed to lift stocks or houses to a specific number) demands a higher level of QE.

The Fed is currently buying $85 billion of Treasuries and mortgages each month. This will remove about $1 trillion of securities from the market in 2013 (85 x 12). The effort should be aiding its residential real-estate goal, since a large part of the U.S. mortgage market is moving onto the Fed's balance sheet.

Yet, there are reasons to think the house-lifting program is waning. One of the more interesting developments is the widely reported tactic of house builders holding inventory off the market, or not building houses, to raise prices. Whether true or not (or, whether it matters or not), there seems to have been no reaction. What would Eric Holder's Once-in-Awhile Justice Department do if Big Oil or Big Pharma announced it was doing the same? This is another (supposed, in this case) example of tolerated flim-flammery in the Crony Capitalist growth model.

The Fed has not boosted, nor talked beyond, its $85 billion a month asset-absorption (and money-printing), since, in April 2013, the Bank of Japan commenced its $80 billion a month of magic wand waving. That is $165 billion of magic money emitted each month by the central banks of the U.S. and Japan. They are not alone: "ECB Says Bond-buying Program is Unlimited" (Reuters, June 9, 2013)

The Japanese experiment is not working as planned, maybe it's early, or maybe another $80 billion a month will be introduced. Some recent headlines: "Yen Drops After Abe Adviser Says BOJ Can Do More" (Bloomberg, May 28, 2013) "BOJ Beat: Mortgage Rates Rise" (Wall Street Journal, June 1, 2013) "Bond Fund Smack-down as 10-Year Treasury Yield Surges" (Reuters, May 29, 2013) For the callous observer, watching everything Chairman Bernanke taught, wrote, and preached turn into its opposite is a delight.

Continuing in that vein, asset exuberance is slowing down. A new issuance of Rwanda bonds would probably not pass muster today. (See: "Big Money") Some recent headlines show the change in tone: "Apple Wows Market with $17 Billion Bond Deal" (Reuters, May 1, 2013) "Rising Mortgage Rates, Home Prices a Lethal Brew" (Yahoo, May 29, 2013) "U.S. Bond Funds Suffer Second-biggest Withdrawal Since 1992" (Bloomberg, June 7, 2013) "This is Increasingly Looking Like an Emerging Market Meltdown" (Business Insider, June 11, 2013) "Global Sell-off Hits U.S. High-yield Market (TD Waterhouse, June 11, 2013) "Apple Bonds Lose 9% in Six Weeks" (CNBC, June 12, 2013) "Rising Mortgage Rates Elicit Fears They Could Hurt Recovery" (Washington Post, June 18, 2013) "Mortgage-bond Failures Reach Most in 2013 as Prices Drop" (Bloomberg, June 20, 2013) "Fed Chairman Bernanke Optimistic About the Economy" CBN News, June 20, 2013) "Drunken Ben Bernanke Tells Everyone at Neighborhood Bar How Screwed Up the Economy Is" (The Onion, August 3, 2011)

Central planning is failing. This means we will get more of the same. After that, the central banks plan to hand out money. Gold fell below $1,300 and silver below $20 on June 20, 2013. Get it while it's cold.

By Frederick Sheehan

See his blog at www.aucontrarian.com

Frederick Sheehan is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, November 2009).

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Frederick Sheehan Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules