FedUpUSA

Archive for February 10th, 2010

Wow, Look At My Jaws Move: Bernanke

Posted by Karl Denninger

You have to love the hubris:

Also, before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate. These changes, like the closure of a number of lending facilities earlier this month, should be viewed as further normalization of the Federal Reserve’s lending facilities…..

Yeah, as if you have control of this Bernanke…..

That’s up 500% in the last few weeks.  Yes, it’s very low (0.1%) but remember the target is 0 – 0.25%, and the discount rate is supposed to be above that.

So in reality there’s some pressure building here, and when the IRX gets to, oh, 3 or so (which at this rate of change it will rather soon) The Fed will be forced to either crank up more QE or raise the rates to follow!

The Fed sets rates eh? What’s this chart say?

The red line is the 13-week T-Bill rate, and the blue line is the Fed Funds rate (now discontinued since they went to the “range rule”, but it shows the point.)

Which leads which Bernanke?

In virtually every case the market rate moves first, and The Fed FOLLOWS the market, not the other way around.

This, by the way, is rather obvious.  If The Fed was to try to move the market when it did not want to move, it would have to expend an infinite amount of funds to do so – either printing an infinite amount of money (destroying the dollar) or soaking up an infinite amount of dollars (destroying itself.)

Those who pray at the alter of Fed Omnipotence are rabid idiots; The Fed’s own data, which is produced above, proves it.

Moving onward…

These loans were made with great reluctance under extreme conditions and in the absence of an appropriate alternative legal framework. To preclude any future need for the Federal Reserve to lend in similar circumstances, we strongly support the establishment of a statutory regime for the safe resolution of failing, systemically important nonbank financial institutions.

As opposed to willful and intentional blindness when it came to the creation of fully synthetic CDOs written by primary dealers, over which The Fed has regulatory jurisdiction, which were then “swapped off” to an alleged “insurance company subsidiary” which had no money to pay?

While it is true that The Fed had no regulatory power over AIG it is absolutely false that The Fed had no ability to stop this abuse, since the abuses originated in and were promulgated through firms over which The Fed did and does have regulatory power.

Of course admitting that you missed this would be equivalent to admitting that you really are either stupid or bought (whether monetarily or simply by ideological bias) and that won’t do, will it?  You’d prefer to simply ignore this like you ignore your plethora of false and outrageously-blind pronouncements on the economy in general, including your claim that there was no housing bubble, that we would not slip into recession and that “subprime is contained.”

Keep flapping your jaws Ben – it’s what you’re best at.

China Says “Risky Assets” Are Too Risky

Posted by Karl Denninger