Graph Courtesy of Market-Ticker.org
If at first you don’t succeed, fail, fail again. That seems to be the modus operandi of the Federal Reserve this week, which announced an additional round of quantitative easing. (Bloomberg). The Fed will now link its rate guidance and forecasts to the unemployment rate, dropping its traditional calendar-based time horizon. Rates will remain low as long as unemployment is above 6.5%, and that could be a very long time. Starting in January, the Fed will pump another $45 billion of liquidity into the economy via purchases of long-term bonds.
Blog Talk Radio host Ticker Guy (Karl Denninger) and his robust blog Market-Ticker.org are always go-to sources for perspective in these crazy times. (Beware of rising blood pressure at these sites and remember that meds will cost more under Obamacare.) He posted the graph shown above, which proves the old adage that a picture is worth a thousand words. After nearly FIVE YEARS of spectacular pump priming (let alone the stimulus spending by the federal government), where the hell are we? Answer: rising inflation, a stagnant labor force that is growing poorer by the day, a credit-starved economy for those not fortunate enough to possess blue chip balance sheets and, of course, mounds and mounds of new federal government debt to haul around and service.
No doubt the Fed will continue undaunted, confident in the efficacy of its policy nostrums. The Bloomberg piece cited above reports:
FOMC participants today lowered their forecasts for growth next year. They now see the economy expanding 2.3 percent to 3 percent, compared with 2.5 percent to 3 percent in September. Estimates for 2014 are from 3 percent to 3.5 percent, versus 3 percent to 3.8 percent in the previous projection.
Fed officials met as the economy showed few signs of reaching the pace of growth needed to put 12 million unemployed Americans back to work. While housing and auto sales have picked up, business spending and exports — two drivers of the three- year expansion — have cooled amid slowing global growth.
When will the madness stop?