Is the Fed Losing Credibility?

www.armstrongeconomics.com

The Federal Reserve pushed back its plans to raise its benchmark short-term interest rate, which was widely expected following the jobs report previously. Yet this was not a credible day for the Fed in the least as they are starting to appear to be confused and skitzofrantic. Fed credibility is beginning to create a crisis behind the scenes generating doubts about monetary policy moving forward. The Fed’s monetary policy appears ai9mlessly wondering trying to figure out what to do with conflicting problems on both side of the dividing line. It’s not clear that the Fed has a grip on any theory and is revealing that those at the top perceived with so much power, are helplessly a drift in a ship without sails, rigging, a rudder, or an engine.

Consequently, after a two-day policy meeting, the Federal Open Market Committee emerged unanimously voting to hold the federal funds rate between 0.25% and 0.50%, that they are paying banks to hoard cash in excessive reserves. They are in bed with the bankers who tell them then need a place to park money without risk. The entire idea of quantitative easing was to inject cash to “stimulate” the economy. But that policy never achieved its goal and the US economy bounced back, but it was a dead-cat bounce. This has been the worse recovery in Post-Depression history because they have paid bankers not to lend money. Paying bankers .50% to hoard money has caused the velocity of money to collapse altogether. European banks are shipping cash to that States and parking it at the Fed to achieve that same riskless trade.

The Fed cannot break free of the bankers to see what they are actually doing is not stimulating the economy, but causing it to contract.

Here we have the Dow electing our Daily Bearish Reversal and Gold electing a Daily Bullish Reversal all because they FAILED to show the world they have this under control. Yet this reaction from the markets is terribly interesting. The Dow declines because the Fed DID NOT RAISE RATES, and gold rallies for the same reason. This is counter-trend to the general “fundamental” expectations.  The Dow was doing well with the prospect of a rate hike until the jobs report and it rallied but stopped dead with the Weekly Bullish Reversal at 17800. Gold crashed but held our critical Bearish Reversal at 1206 and bounced. While the gold crowd thinks a rally is good because the market will crash, at the same time we have the Dow declining with lower rates instead of higher rates. These trends are showing extreme stress in the financial markets overall.