Fed Meeting: What It Means To You
I was ready to pounce on Fed Chairman Ben Bernanke one more time before the end of the year, but found out that yesterday was his birthday. As a fellow Sagittarian, perhaps I should be kinder...nah!
Here's what happened at the last FOMC meeting of the year: nothing. Fed policy stands as follows:
- Federal funds rate (short term interest rates) = 0-0.25 percent (been at this level since 12/16/08
- Fed will keep "exceptionally low levels of the federal funds rate for an extended period"
- "QE2"or the central bank's $600 billion dollar bond-buying plan is still on track
- The job market is weak
- The recovery is slow
- There is no inflation
- Lending is still tight
- Housing stinks
- Because of the aforementioned, consumers are wigged out and not spending
Um, this is the best that a bunch of PhD's could give us?
Here are some unanswered questions that would have been interesting for the Fed to address:
- If the point of the $600B bond purchase plan was to keep longer term interest rates low, why has the 10-year treasury soared from 2.62 percent, when the plan was announced, to 3.4 percent today? (Answer: could it be that the banks were happy to front-run the decision after various Fed governors "hinted" at it for three months?)
- How does the current monetary policy encourage banks to lend the nearly $1 trillion they already have in excess reserves? (Answer: It doesn't)
- Your predecessor Alan Greenspan said that there's no way to spot an asset bubble. Do you think that the current policy could at all contribute to rising prices in certain assets, like say stocks, or commodities? (Answer: Easy money has to go somewhere--why not make people feel better about their retirement accounts, so they stop obsessing about their home values?)
Image by Flickr User lingscrafts, CC 2.0
