Monday, September 8, 2014

What is the FED really going to do?

This is one of the biggest questions we will have to follow here in coming months. We noted that people like Jim Rickards, Peter Schiff, Michael Pento and many others believe the FED forecasts for an economic recovery are wrong. They are flatly disputing not only their forecast, but also that the FED will really be able to end QE and start thinking about raising interest rates. 

We also ran articles this past week showing that the St. Louis FED now admits QE has not produced the expected GDP growth and the ECB admits the Eurozone economy is so weak they will have to start up an asset buying program there. And yet there seems to be a determination to stick with the story that the economy is poised for recovery and better growth. As we noted in this article, someone has to be wrong here.  Let's take a look at the latest news related to this ongoing debate.

Late this past week the job report came out much weaker than forecast. Here are two articles reacting to that news:

"Investors betting the Fedral Reserve will accelerate its timetable for an interest-rate increase may have to think again after today’s jobs report. Fed Chair Janet Yellen and colleagues urging patience in tightening policy got a boost from the surprisingly weak 142,000 increase in August payrolls reported by the Labor Department, economists said."

"Given the "significant" slack in U.S. labor markets, the Federal Reserve should be patient about reducing monetary policy stimulus and refrain from telling markets exactly when it may raise rates, a top Fed official said on Friday."

Despite the above news there seems to be a determination to insist that things are going well and will get better. Look at these comments quoted from the two articles linked above.

"It seems to me appropriate for monetary policy to continue to be patient—in the interest of ensuring that the economy reaches full employment and the 2 percent inflation target as quickly as possible," he (Rosenberg) said."

"“We are skeptical today’s payroll growth represents the start of a weaker trend,” Neil Dutta, head of economics at Renaissance Macro Research LLC in New York, wrote today in a note to clients."

Joining Jim Rickards and others who believe these rosy predictions are wrong was John Williams of He did this interview with Greg Hunter this week in which he claims the economy is in bad shape and will get much worse. He and Rickards both claim government economic reports are falsely presenting a rosier picture for the economy than the real situation. Someone has to be wrong. We will follow it. Get your popcorn.

No comments:

Post a Comment