Comments on: What Can the Market Tell Us About Surprise Fed Action?

By: The Fed Feints | Monty Pelerin's World

The Fed Feints | Monty Pelerin's World — Sat, 20 Feb 2010 12:36:28 +0000

[...] the media and the markets. Pundits discuss earnestly the spice has been added to the tea leaves. Barry Ritholtz lists three possible motivations behind the Fed’s [...]

By: Pat G.

Pat G. — Fri, 19 Feb 2010 23:25:04 +0000

Zilch!! They raised the discount rate at the “window” a quarter of one percent. Who cares when as it was way overdue. The ass clowns on CNBC are touting this like the FED is beginning to tighten. Please.. No wonder serious journalists there are abandoning that drowning ship like rats. In either event, gold took that and the news that the IMF is selling 190 metric tons of the metal into the open market in stride. The Canadian dollar actually stregthened against the USD. Forget the Euro, as we both have the same sort of problems. Compare the USD to a country who has its fiscal shit together.

By: torrie-amos

torrie-amos — Fri, 19 Feb 2010 19:58:46 +0000

cognos,

average family 2 peeps, 20 gallons per driver, that’s 40 total per family, 40 times extra 2 bucks = 80 times 52 = 4160 after taxes, pre tax over 5k

gas started decade out at 1.50 avg, boil dem frogs

avg cars on road, get’s no where near 25 mpgs, hell i got a honda i get 18-20 real life, so at 20 mpgs per gallong

average on a spread sheet versus real life is quite different, maintenance, who needs maintenance, that gets put off and it escalates

you do realize 80% of people do not think like you?

By: rashley314

rashley314 — Fri, 19 Feb 2010 17:40:32 +0000

Just coincidence that it comes on the heels of the Taibbi article talking about borrowing from the Govt and buying bonds??? Nah… too Oliver Stone-ish…

By: TheMoneyDemand blog

TheMoneyDemand blog — Fri, 19 Feb 2010 17:11:21 +0000

This tightening move is a mistake, but it is a reversible mistake. And perhaps this is the price Bernanke has paid to keep fed funds rate at near zero longer.

By: d4winds

d4winds — Fri, 19 Feb 2010 15:42:49 +0000

This a non-event; but that doesn’t mean the markets won’t think so. Absolutely nothing has been done by the Fed to increase the rate it pays commercial banks for excess reserves (circa $1tn+ for the last year). That rate–much more important now than Fed Funds ever was–is the governor on the bank money creation process. So the Fed’s deeds have entirely matched their words on QE. Also, cash-for-trash and Ibank support at the discount window has not ended. The only signal being sent by the Fed is that it thinks that private credit markets are–finally–on the mend. As for traders pay attention to, mainly it’s to what other traders are doing.

By: cognos

cognos — Fri, 19 Feb 2010 15:27:59 +0000

Marshall — your numbers are WRONG:

Defense = $700B
Social Security = $700B
Medicare/Medicaid = $700B

Together these 3 are roughly 2/3 of the federal budget and 2x the “deficit”.

The typical point is the OPPOSITE of what you said… which is “descretionary” spending only affects 1/3 of the budget (and <1/3 without all this 'stimulus' spending).

The typical point is that UNLESS one is going to talk about cutting defense, SS, or medicare… you arent going to shrink the govt much.

SEE: http://en.wikipedia.org/wiki/2010_United_States_federal_budget

By: Bokolis

Bokolis — Fri, 19 Feb 2010 15:21:04 +0000

This was too telegraphed, as has been pointed out, to be the messing-with-Sasquatch or artificial momentum generator that it could have been used to be.

Bokolis’ initial reaction was, whotheF cares? If the lack of traffic on my drive to work this morning is any indication, not many of you care, either. Judging from the volume, even the shlubs that would maneuver on an expiration Friday don’t care.

By: Marshall

Marshall — Fri, 19 Feb 2010 15:08:52 +0000

All depends what Treasury does. And by the way, the discretionary spending that is supposedly “out of control” is actually not that high. The largest portion of the increase in the deficit has come from automatic stabilizers and not from discretionary spending, which is a reflection of our lousy economy.
As estimated by the New York Times, even if we were to eliminate welfare payments, Medicaid, Medicare, military spending, earmarks, social security payments, and all programs except for entitlements, and in addition stopped the stimulus injections, shut down the education department, got rid of a number of other things and doubled corporate taxes on top of all of this, the budget deficit would still be over 400 billion. This further demonstrates the non-discretionary nature of the budget deficit. And of course this doesn’t take into consideration how much more tax revenues would fall and transfer payments would rise if these cuts were to be undertaken. With the current automatic stabilizers in place, the budget cannot be balanced, and attempts to do so will only cause damage to the real economy as incomes and employment fall.

As Abba Lerner once wrote, fiscal policy should be conducted with view to results and not following some conventional/ceremonial ideas about what is sound and what is not.

By: Andrew

Andrew — Fri, 19 Feb 2010 15:03:01 +0000

Speaking of which. Apparently they’re still long a good amount of Treasuries…

Pimco’s Gross: Fed move is not start of tightening cycle

“I don’t think it’s the beginning, really, of a tightening from the standpoint of monetary policy,” Gross told Reuters Insider television soonafter the Fed’s decision. “I don’t think it is the beginning of an increase in the fed-funds rate or in terms of interest on reserves that has been discussed as well.

http://www.reuters.com/article/idUSN1823668120100218