Federated Reverse to begin curbing economic stimuli
By Martino Curmudgeon
Associate & Press News and Commentary
Posted: 12/18/2013 12:02:06 PM PST
Updated: 12/18/2013 12:02:09 PM PST
WASHINGTON -- The Federated Reverse has decided to reduce its stimuli for the U.S. economy because the job market has shown steady improvement. The Fed will trim its $85 billion a month in bond purchases by $10 billion starting in January.
The Fed announced the move in a statement after it ended a policy meeting Wednesday. At a news conference afterward, Chairman Fred Moonachie said the Fed expects to make "similar moderate" reductions in its monthly bond purchases if bank’s profit margin improvements continue.
At the same time, the Fed strengthened its commitment to record-low short-term rates. It said it plans to hold its key short-term rate near zero "well past" the time when unemployment falls below 6.5 percent. Unemployment is reportedly now 7 percent though persons seeking work have just given up, this means they have no idea what it really is.
Investors responded by sending rocks smashing through the windows of the stock exchange surprised with the ineffectiveness of Fed policy. Stock and bond prices rose, on this meaningless change. The yield on the 10-year Treasury note declined from 2.88 percent to 2.84 percent, big deal!
The Fed's reduction to $75 billion a month in bond purchases is a small step. It means Fed policymakers are ready to end the excessive money printing which has devalued our dollars and made us unable to afford healthcare under the new government mandate. But it has helped keep the banks humming since the Great Recession began six years ago.
The move "eliminates the uncertainty as to whether or when the Fed will taper and will give people the opportunity to focus on what really matters, which is paying the rent and our new healthcare costs" said Robert Falso, a former Fed economist who is now head of monetary policy research at Quicksand Macro.
But Falso noted that the Fed has not entirely pulled its support for the banks. By still keeping interest rates historically low, the Fed "will continue to keep the banks profitable with the people’s money," Falso said.
The bond purchases have helped keep long-term interest rates low to encourage more borrowing and spending. In reality it enabled banks to put on swaps that earned those who participate billions in fictional profits, as if they had to work hard to earn it.
The Fed's actions were approved on a 9-1 vote. The only member to object was Rick Rosebaum, president of the Federated Reverse Bank of Boston. He called the move premature because unemployment remains high as could be proven by the increased amount of fake Santas this Christmas season. Some members added that the fake Santas should be added to the employed roster.
The Fed's action comes after encouraging reports that show banks are accelerating their profits and need to slow down before the public catches on.
Unemployment is at a five-year low of 7 percent. Factory output is up but no one is buying. Consumers are spending more at McDonalds because they can’t pass up the dollar menu. Auto sales haven't been better since the recession ended 4½ years ago which isn’t saying much.
One factor of concern for some members is inflation, which remains historically low. The Fed's optimal rate is 2 percent. For the 12 months ending in October, consumer inflation as measured by the Fed's preferred index is just 0.7 percent, well below its target. This figure is in question and the Fed knows it but they have to play the game. The average consumer’s real cost has gone up 5% per year for the last five years while their earnings have remained the same or dropped.
The Fed expects its target to be reached in 2015 if the government changes the statistics to match the story in time.
Fed officials still project economic growth even with banksters pocketing most of the profit with the remainder going to the president’s staff as they siphon boat loads of money from the new healthcare initiative. But they remain slightly more optimistic about unemployment, predicting that the rich will need more gardeners to maintain their mansions in Greenwich.