Fed Governor Jerome Powell says “Signs of excesses are ‘isolated’. Asset Prices ‘not broadly unsustainable’“.
The Federal Reserve does not see “broadly unsustainable asset prices,” a senior U.S. central banker said Saturday, with financial excesses stemming from almost a decade of ultralow interest rates “isolated.”
In remarks as part of a panel discussion at the American Finance Association meeting, Fed Gov. Jerome Powell defended the central bank’s policy that has kept interest rates at historic lows since the financial crisis. The Fed pushed rates to zero in December 2008 and has only raised them only twice since, both in the past year.
The policy of low rates has helped the economy recover, and has helped strengthen the financial sector, he said. “By many measures the U.S. financial system is much stronger than before the crisis,” Powell said.
There are trade-offs, because low interest rates can have adverse impacts on financial markets in a number of ways, he said. “Low rates can lead to excessive leverage and broadly unsustainable asset prices — things that we watch carefully for and do not observe at this point.”
Missed Elephants
- The Greenspan Fed missed the dotcom bubble
- The Greenspan Fed and the Bernanke Fed missed the housing bubble
- The Bernanke Fed and the Yellen Fed missed the asset bubbles now in progress
The only way to not see this bubble is to be willfully blind to economic fundamentals for the sole benefit of banks and the wealthy, to the detriment of everyone else.
Mike “Mish” Shedlock
How long before somethings gives way?
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When Trump takes office ?
The stock market going through the roof since Trump’s election tells me that something is planned.
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I have suspected that from the get-go. 2 years of a volitile market does not just take off and go to the moon.
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Depends what point you compare with for asset prices , have the impression that 0 rates is to reflate and cover the mismatches from previous bubble. IOW part of the objective is to avoid new bubbles and flatten the field, readjusting it in the process, to then push out the failures. In that case clearly productivity and real earnings are going to stagnate as productivity is only maintained while money supply increases.
What gives next depends on too many factors. Low rates could be an indefinite feature until political crisis, or market could wipeout false projections overnight but still all continues near as is. Who wants higher rates? Tend not to be the majority, so I think regulatory actions will be used in place of for specific ends, so when something gives it will already be contained or containable. Hard pressed to think what part of the US market remains that is systemic and not able to be doused. I think outside US likely to fall through first, probably Euro, maybe China, capital flight to US will warrant rate rises then. Other possibility is US decides on a hard landing, last election showed many wanted a shake up, US rebuilding itself from the prompted ruin of past slack.
You know I am guessing on this , but this is how it looks to me.
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” Who wants higher rates? ”
____________
Prolonged historically low interest rates have hurt lots of people. This is why pensions are in trouble.
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Yes, but there is a generational gap now. Conservative is balanced to say over 45s, younger generation are balanced towards the left. Other main difference is by race, then gender. I think the younger generation ( henve not ‘established’) know that if rates rise, though in long run maybe better, in short run they are likely to face most difficulty. Of course it depends on if they rise due to the ever approaching boom or because there is a need to ground the economy.
http://www.pewresearch.org/fact-tank/2016/11/09/behind-trumps-victory-divisions-by-race-gender-education/
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Oh the irony…
Because of the third world racial, cultural marxist moral and leftist political demographics of the up and coming generation… it is impossible to “make America great again.” Jeremiah 51:9 prophesied it… “we would have healed Babylon, but she cannot be healed.”
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Yep, the biggest elephant that they missed is that low rates are murder for those millions of retirees who depended on a reasonable level of interest returns on their savings. Many retirees have had to return to part time work and others at retirement age are postponing retirement. Plays havoc with the jobs market. Then there are all the mutual funds not earning interest on bonds and others making risky investments to try to earn their 6-8% expected returns.
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The trouble as I see it is that if you raise rates you are tightening money supply. The competition for savings by offering higher returns has to be matched by the ability to earn that higher interest. Some suggest savers will go out and spend, or foreign capital flows will be attracted, so boosting activity. For the first I do not make that to be true, money supply is overall tightened, it just shifts access to money from cheaper credit with higher asset prices, over to savers and net deflationary in wider terms until/if all manages to readjust. Not judging if good or bad but saying that it likely will bring down parts of the economy in the process as it is much slower to turn around the reality of what is now a reliant majority, reliant on the existing supply of money and its channels. To me that is the elephant.
You know, the younger generation will blame the older just as easily as it is under their watch that this came to be. The older generation were suckered into no fail returns that can only be guaranteed by slack money. The younger generation generally have to try to find their way through a system managed from A-Z where everything is concisely arranged and they are either spoiled or surplus to the mercy of finance.
I suppose if you are going to fix society you have to return it to its owners, though I am not sure they know what their part is anymore, at least without being told. It would keep everyone busy trying to find out though, and they might even learn something along the way… that or turn to conflict if they do not find a place.
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“as productivity is only maintained while money supply increases.”
means/should read
“as productivity is only maintained, while money supply increases.”
The elusively meaningful , .
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26.5 times earnings on the S&P should explain everything.
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What “low unemployment”? 95 million not in the workforce that could work. An increase of 50% since the 90’s. Lot of folks living in parents basements. Paul Verchinski 5475 Sleeping Dog Lane Columbia, MD 21045 410.997-3879
From: MishTalk To: verchinski@yahoo.com Sent: Sunday, January 8, 2017 2:14 PM Subject: [New post] In Search of Elephant in Room, Fed Governors Come Up Empty #yiv0803587302 a:hover {color:red;}#yiv0803587302 a {text-decoration:none;color:#0088cc;}#yiv0803587302 a.yiv0803587302primaryactionlink:link, #yiv0803587302 a.yiv0803587302primaryactionlink:visited {background-color:#2585B2;color:#fff;}#yiv0803587302 a.yiv0803587302primaryactionlink:hover, #yiv0803587302 a.yiv0803587302primaryactionlink:active {background-color:#11729E;color:#fff;}#yiv0803587302 WordPress.com | MishMoments posted: “Fed Governor Jerome Powell says “Signs of excesses are ‘isolated’. Asset Prices ‘not broadly unsustainable'”.The Federal Reserve does not see “broadly unsustainable asset prices,” a senior U.S. central banker said Saturday, with financial excesses” | |
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Audit then end the FED.
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It’s not solely for the benefit of the rich and the financial establishment. It’s for the benefit of the US Treasury, for which every 1/4 percent rise in the artificial interest rate, debt service costs increase $50 Billion. Remember that Congress’ debates over spending explode at $30 Billion. If sovereign debt rates rose to 5% (not unreasonable), our interest rate budget would increase from its present $360 Billion by $760 Billion. That’s more than the entire budget of the Department of Defense.
Some might argue that Ms. Yellen is the only thing standing between the US Treasury and a brutal crisis in our national government finances. And it is not unreasonable to believe that her discussions with the administration have made that clear. As someone pointed out, no one believes the Fed is “unpoliticized.”
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After the inauguration (sp?) the market will roll over. (All the T-man’s fault now, donchaknow)
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Is it possible to figure out what S&P earnings would be without buybacks r is this already factored in? Or maybe just take the Dow stocks earnings without the buybacks, or is this a stupid question?
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Straight up the PE ratios are totally uncalled for. All stock in float would make the number higher. It would be interesting, but what would be more interesting would be how (and who) that market was driven so high and, gee… what ever happened to the business cycle? They seemed to have officially abolished it.
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What if it doesn’t roll-over after inauguration for quite a while?
Surely markets would move there now if timing was so clear cut.
What if something else blows up first, China, or something else?
No one has much of a clue when or the sequence.
Keep dancing?
It might be another1-2 years or more or an extended 20-30 years flat or 30-40% down and stay there for 5-10.
All anyone does is speculate.
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Or just take Catapiller a great bellwether company. Demand for their products and services has been somewhat weak I think I read recently and I know they have had several years of stock repurchase plans. So did this add a significant increase to their earnings?
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OK if the Fed was really audited is there a good chance they own a large amount of stocks?
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Yes.
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I bet the person holding the elephant’s tail is the first to conclude he has found an elephant.
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Another look reveals that one of the blindfolded men is about to pull the elephant’s finger…. oops, there goes the bubble.
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Is the low interest rate being paid to savers a “unbubble”?
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Well if you r right then ther’ll be no audit imo. Once P. Trump learns this surely he would not want this info made public especially since his treasury secretary is a shady banker-all Wall St. Bankers r shady imo.
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And they care we ask these questions… why? They’ve been above the common rule of law for so long, they really don’t care we ask. Also, I’ve said it before, IF they get an audit, they’ll have a perfectly crafted narrative and printout handy to stave off the peons.
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“The only way to not see this bubble is to be WILLFULLY blind to economic fundamentals for the SOLE benefit of banks and the wealthy, to the DETRIMENT of everyone else”.
Amen, Mish. You get it.
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Fed Gov Powell is obviously the blindfolded guy pulling the elephants tail, about to learn average volume of elephant dung.
Silence is sometimes far more effective than mumbling gibberish.
If you stay silent, people might think you are an idiot. But if you open your mouth and say cr-p like “Asset prices are not broadly unsustainable”, everyone will know for certain
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I am of the belief that but for the coordinated intervention by the central bankers aka relay race, they would not have been able to sustain the “asset price bubble” show for 8 long years and the market would have found a bottom by now. That they have succeeded for so long only makes them more pompous and cocksure, having caused trains wrecks so many times in the past be damned. The other part that makes me angry (no use of course) is that they seem to have not only escaped criticisms but also seem to have become stronger and more powerful. While in the past no one knew of central bankers, today they are news makers every time they open their mouth to spew some nonsense.
My question is how can we say with certainty that they will not be able to intervene again for the next 5 years (they appear to have no limits). Also they can say one thing (4 rate hikes in 2016!) and do another (just one), never unsettling the markets (or put another way raise only when markets accepts it). The feeling one gets is that they can continue like this forever. They have been pretty effective till date that too for decades.
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All “asset prices not broadly unsustainable” means, is that the Fed judges it possible to keep up their policy of robbing working people via debasement, on behalf of their bankster clients, for a bit longer. Taking the added purchasing power created by the former’s work, away from the wages of those who worked to create it, and instead handing it to the banksters by way of asset appreciation. The rest of their babble, is just obfuscation.
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Bankers printed the Y2K mania to bail out the S&L industry. Then bankers printed the housing mania to bail out Y2K tech loans. Then bankers printed the current mania to bail out sub prime bank loans.
Bankers confiscated goods from the public, for redistribution to bankers. Printing is confiscation. Bankers took from almost everyone, but many fixed income elderly and poor could not afford what the bankers took from them.
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The Federal Reserve does not see “broadly unsustainable asset prices,” a senior U.S. central banker said Saturday
They are never going to tell anyone that they see broadly unsustainable asset prices. The market hangs on the FED’s every word.
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Whenever you have a group of highly educated people who fail to see the obvious, it’s almost always willful ignorance. These people are not as dumb as we think they are. Better to fain ignorance than state the obvious truth.
It’s the same with global warming. The republicans know it’s real. They have to play dumb to get the oil backing.
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Help the handicapped…BLINDNESS is a handicap…soooooo….HELP those that are afflicted by Blindness…END THE FED……as a social responsibility and charitable gesture, so those that are being robbed by the ‘mindless and blindness policies’ of this ‘organized crime family ‘…the fed the bis and the world bank…end them all….PS…stop funding the UN …and withdraw from it also….imho
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