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More on the Fed Minutes

Posted By Barry Ritholtz On December 12, 2003 @ 10:56 am In Finance | Comments Disabled

A friend, who insists on remaining anonymous (under penalty of death) has some astoundingly astute observations regarding yesterdays release of the October FOMC minutes [1]:

Okay. Let’s get this straight. The minutes of the painstakingly specific October FOMC meeting were released at 2 p.m. At that moment it was revealed to us that the FED thought back then that there would be no jobs and still-underutilized resources, maybe for another couple of years . . . and stocks got jammed to the point where (this is almost painful to relate), to the point where, out came the “DOW 10K” baseball hats (no cake this time, TG) on Bubblevision and the giddiness continued. Now get this: Just an hour earlier (1:00 p.m.), over in the bond market, they couldn’t give away $12 bil of a 10-yr note. Even the usually meretricious central banks turned up their noses at the offering. But with just a few magic words from the FED, including a tailor-made message to the bond geeks …. “economic slack and high productivity rates were likely to hold inflation at very low levels over the next year or two….”, Bingo, the whole curve surged. Govvies, by nature, sure do love bad news. Evidently, stocks do, too.

Okay. Here are some thoughts that I had while I pondered the surreal nature of what was unfolding:

1. Is it me or were we not, very recently, being spoon-fed a notion that the FED, quite ingeniously, was reflating the economy and that the weak Dollar was one means towards that end?
2. How successful is that “reflation” policy if they are now talking about “slack” plaguing us for another 2 years… or longer?
3. This makes me think that they are quite aware that they are pumping money, but there are no takers…

2 more years or longer? Geez, Louise. And along those lines, look: M2 fell $2.8 bil and M3, down another $11 bil in the most recent period ending 12/1. And no, I don’t buy that story about folks taking money out of bank accounts to put to work in the stock market as one of the oft-repeated reasons for the collapse of the monetary aggregates, because I always thought, silly me, that when one person bought a share, somebody else sold one, so I’m a short-seller of that excuse.

Despite my exhortations to the contrary, this anonymous person refuses to go public. (Its a compliance thing) That’s too bad; Wall Street needs more voices of sanity . . .

See also:
Uncle Al throws a Greenspanner in the works [2]
Alan Wood
The Australian, December 13, 2003

http://www.theaustralian.news.com.au/common/story_page/0,5744,8145750%255E7583,00.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2003/12/more-on-the-fed-minutes/

URLs in this post:

[1] October FOMC minutes: http://bigpicture.typepad.com/comments/2003/12/fed_notes_exces.html

[2] Uncle Al throws a Greenspanner in the works: http://www.theaustralian.news.com.au/common/story_page/0,5744,8145750%255E7583,00.html

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