That Janet Yellen is quite a GUY! Part 2

“Give me control of a nations money and I care not who makes its laws”
~Mayer Amschel Rothschild

The decision made by the Federal Open Market Committee (FOMC) today is fundamental to the direction of the USD and the US economy. The market responds to the FOMC meetings and anticipation of their decision to raise, extend, or lower the Federal Funds interest rate. The FOMC also makes the decision to increase or decrease money supply. We have seen them increasing money supply since 2008 purchasing long term treasury and mortgage backed securities and quantitative easing (QE) and it has caused interest rates to fall to zero percent, the lowest rate possible. The FED spent eighty-five billion a month buying up those securities. In the last few years the have cut back by ten billion a month. The playbook the FED has been using has been misleading trying to fight economic weakness by using a synthetic form like (QE).
If the FED wants economic growth, they decrease rates. Too much of anything is never good; going to any extreme is very bad. An economy that grows too fast leads to inflation. The increase in rates would slow the economies growth, too slow leads to a recession. Any change in the Federal Fund interest rates will impact us all; even the domestic public will feel the effect with the cost of credit. It will impact the direction of the USD, and how the US economy performs overall. Our economy is barley a float and I am being generous in that statement
Seven years since the crash, Yellen may be forced into a hike; the longer it takes for the inevitability of increased rates the harder the recovery will be. The impact would change everything on a global scale. Could the FED even risk a hike? They will have to raise them eventually, and what better time all the numbers are lined up. The USD is in popular demand. Everyone wants USD this leads to an over stimulated demand. Fact is, finding USD counter parties for swaps is difficult, and a raise could help. If they don’t raise people may abandon the USD, even though the FED would never admit that. To raise or not to raise that is the question. Since the FED is independent what is best for them? The FEDs choice really has nothing to do with the economy and stability of monetary polices. This is about the bubble of government debt that cannot be serviced at a higher rate, even if the US had the tax base to do so. The wages report proved we can’t afford to service the debt, if those numbers are even close to the truth. It is a lose-lose situation.


The anticipation has begun. We already see investors who bought high price stocks pulling out before the FOMC meeting. This time around, bonds are no longer a safe haven; the European Union (EU) and the FED have set the market up for a crisis, a historical bond market collapse. The mass (QE) in Japan and Europe has created a runaway dollar making real US economic recovery impossible. The FED is running out of options. Force the domestic public to buy treasury debt and get low yields bankrupting the people. It could be the reverse bankrupting the FED with high rates in interest and mass retracting of domestic cash availability. The economic activity would be crushed by the Treasury’s detraction of five percent off the GDP. Under a mandate, the FED has to pay any profit that acquires from the interest rate increase back to the Treasury so government pays zero in FED held bonds anyway so the raise would not really benefit the FED or impact the government the way one would think. They keep talking about a small rise. Just a one percent rise in interest on debt would total around one hundred and eighty billion dollars added to the FEDs interest. If US Treasury bill becomes too pricy for the government, they will need to be bailed out by the FED and then the FED buys up those expensive bonds. This buying would be a domino effect of disaster, starting with forcing the USD in to the system by QE4, then hyperinflation, the US dollar would be buried. Everything would collapse however all the debt would be gone. This may be the idea, they know much more information than we can even imagine, this could be the “master plan”, the real reset right around the corner.
Will they monetize debt and risk mass inflation? They would piss off every bondholder in the world causing unpredictable consequences. I personally don’t think they will raise rates, not yet and probably not in June. They could go lower, however negative rates are discouraging to investors. They would issue QE4 before they lower them. The risk of negative rates would rip apart the US defecate, the financing costs would be immense. Negative rates would show just how bad it is and I doubt the United States would pay a premium for foreign investors to have cash in the US. If recovery is possible, true economic recovery will never happen with negative rates, and they know that. The increase would cause a political frenzy, voters who have never even thought the raise could effect them will be looking at all the politicians demanding an explanation looking for someone to blame, the derivatives market implodes and it becomes clear that these trusted politicians have been piling the bank derivative liabilities on the United States taxpayer.
The FED has a limited historical perspective on what a healthy functioning financial system really looks like. Have we seen a healthy economy? Do we have a clue what normal bonds look like? An economy where we put money into a CD or account and get paid to save our money. To better our economy as a whole, a normalized economy. The years of manipulation and bailouts have desensitized people into bad decisions with their investments that didn’t even make sense to begin in the first place. Bonds and stocks have been pushed by the zero percent interest rates at unsupportable levels.
The market is overvalued and if the FEDs decision were based on real data as much as they claim, the rates would have increased a while back. We already see investors who bought high price stocks pulling out before the FOMC meeting. Yellen may push the decision back till June in realizing the massive momentum of equities sell offs. The market has already reacted. With little regard for yields, big money ran out and bought up overvalued bonds, praying the FED will extend the decision till June. This time around, bonds are no longer a safe haven. The European Union (EU) and the FED have set the market up for a crisis, a historical bond market collapse. Manipulation of bond rates from trillion dollar swaps has been the course were on, it would be harder to reverse it now. The raise would cause the bond market meltdown and a market crisis. Bonds have been the life support for banks. If they rise rates an even a quarter point, like they are implying. On a one percent yield, big money would dump all bonds paying at one percent and buy up the one and a quarter. It would cause instability with the bond market, and this bubble is getting bigger and bigger. The end of QE caused an international tsunami into US bonds. They may not have a book that can help this time.
Truth and lies move the market the most; sadly, one isn’t different from the other, the truth, or the lie. It doesn’t matter what’s real or not because human behavior is what you trade on or invest in. Behavioral, social, Industrial, all psychologists and analysts, teams of them all put together with specialists in marketing just to predict what you do, say, how you feel, live, dress, but most of all…what you will spend and spend it on. Let’ say for instance you spend on the market, well they know what you are going to purchase, sell or watch and “they” the big money bet on it. Government runs our media and how and what we believe to be real, news, trends, politics and finance. The decision starts today and with the housing numbers so dismal it looks like an extension and more “patience” is in order, how convenient.

It will be a panic driven recovery

That Janet Yellen is quite a GUY!

Part 1
Last year Ben Bernanke’s predecessor Janet Yellen was sworn in as the Federal Reserve’s (FEDs) chairperson February 2014, she is the first women to lead the FED in its one hindered year history; many people attribute her position to Obama because she was his top pick for the chair. It became clear she would follow in the footsteps of Bernanke after leading her first meeting a little over a month after being sworn in. The decisions the FED make effect every person on a global scale; they truly are the most powerful independent entity in the world. Although the FED is independent, the FEDs governor positions of the FOMC members are appointed by the US President with the approval from the US Senate for fourteen year terms. This fourteen year term is designed to minimize the political influence one president could have over the board. The FED tells us their goal is to have steady economic growth, Yellen has been open about her goals normalizing the US economy.
If the FEDs decision was truly based on data as much as they proclaim they would have increased rates already. If the US showed signs of real economic recovery, Yellen wouldn’t have to tiptoe around her wording the way she is. The FED recently has tried to become “more transparent” with their decisions. Yet, we as the domestic public are only allowed to know very limited information as to what exactly they as a whole are looking at. The FOMC members look at what they call a “Green Book” the forecast of the US economy, a “Blue Book” that holds monetary policy alternatives and the “Beige Book” that is the only book of these three that is released to the public two weeks before the FOMC meeting. This Beige Book holds a description of economic conditions from each Reserve banks district.
The anticipation of the Federal Open Market Committee (FOMC) meeting is just as important when trading Forex as the actual rise or decrease of the interest rate decision. Statements made by any FED member are extremely important. Analysts dissect every word and examine the language used. For many, a hedge on what decisions the FED make is the key to outsmarting the competition and profiting. The media loves any statements made about or by the FED, it is difficult to look at the facts with the government run media polluting the market with meaningless opinions, or what they want you to believe is the direction they are taking. Even the announcements by the FED itself can be misleading, for instance they took two years to stop Quantitative Easing (QE) after saying that they were considering it. Fortunes ride on every word of the Federal Reserves announcements. No other legislative entity has more power and influence on how the financial market moves than the FED. Other counties look to the FED for direction and have even followed the FEDs monetary policies, and continue to do so. This coming meeting is particularly important for many private traders, investors, and big money. This meeting is on the Federal Funds interest rate change, an increase or the decrease of Federal Funds interest rates. The decision will impact every US bank’s interest rate fee and how they lend and barrow money.
For those that don’t know what the FOMC interest rate decision is, let me briefly explain. One could think about the importance of this meeting and announcement like the government quarterly earnings report. Eight times a year the FOMC meets to set the monetary stance, fixing the federal funds overnight borrowing rate. This federal funds “interest rate” is what you hear so much about, the rate the Federal Reserve (FED) lends balances to other depository institutions, banks borrowing reserves and lending to one another at the Federal Funds Rate. The FOMC sets a target rate rage; however, the Open Market actually decides the rate itself. That is why most of the terminology used by the FED is vague or abstract misleading even contradictory. Market forces determine the actual rate itself. The FED will do what it needs to by influencing the operations in swaying the Open Market a multitude of ways. The FOMC makes changes based on non-specific economic data and undisclosed target numbers. Banks, credit unions, all depository institutions are required to keep a target amount of money in reserves at all times. For instance when a bank is over or low on that target reserve they must borrow or lend. A bank above the target is sitting on non-interest gaining money and will be lent to another who is low on their target reserve. The Federal Funds Rate adjusts to the supply and demand of bank reserves .The decrease in rates comes from the reserve supply being greater than the demand causing a decrease in the funds rate. The reports that are looked over by the FOMC from the Central Banks (CB) is ultimately what sets the target rate for now and direction in the future. If a rate decrease is needed, the FED buys US treasury securities creating new money and a larger reserve supply, increasing bank reserves without overnight borrowing in the reserves market. If the reserve supply demand is higher than the supply, they raise rates. The increase means the FOMC would sell US treasury securities causing a reduction of bank reserves and more overnight borrowing. The FED buying and selling open market operations and US Treasury securities is the way they implement monetary policy and maintain the target rate. The problem is liquidity keeps drying up, then open market law fails as money increases then becomes too expensive for government to borrow, this is what Yellen is trying to avoid.