“What we need is a central bank that has the humility not to do what it cannot do. And the Fed cannot do what others have failed to do, namely to plan an economy from a central desk in the capital city.”
-Jim Grant, publisher of Grant’s Interest Rate Observer
“The Fed is being run by the single most-dangerous man ever to hold high office in the history of the United States. Bernanke is so bad that we should wish to return to the age of Marriner Eccles in 1935 – a fiscal Keynesian who believed that money-printing would fuel speculation and inflation; if the government were going to rob the people, it should do it the honest way – through taxes.”
Sebelumnya saya ingin menyampaikan bahwa karena jadwal yang sangat padat bulan ini, saya akan jarang menulis laporan ini dalam beberapa pekan ke depan.
Dan dalam laporan ini saya ingin menyampaikan efektifitas (atau kekurangannya) dari pencetakan uang bank sentral AS – katakanlah seperti itu – dan menunjukkan apakah the Fed dapat benar-benar merangsang perekonomian dan/atau menekan tingkat penganggurannya.
Berikut adalah 2 artikel Charles Hugh Smith dari Of Two Minds, yang kembali tanpa ragu mengungkapkan pikirannya mengenai pelonggaran moneter tanpa akhir dari the Fed. Meskipun artikel pertama ditulis pada awal Juli, Charles menjelaskan dengan sangat baik tentang sejumlah alasan mengapa Bernanke melakukan pelonggaran moneter:
Fed Has No Hammer, Uses Handsaw And Chisel To Pound Nails
The next time the Fed unleashes quantitative easing, maybe we’ll finally wake up to the fact the Fed is not just powerless, it is actively destructive.
The Fed is promising once again to pound nails with the only tools in its toolbox, a saw and a chisel. The “nails” the Fed is trying to pound down are unemployment and deflation. Needless to say, whacking these big nails with a handsaw and a chisel is completely useless: they can’t get the job done.
The Fed claims all sorts of supernatural powers to sink nails at will–”unconventional monetary policy,” quantitative easing, money dropped from helicopters and so on. But all it really has are two tools which have no positive effect on unemployment or the real economy.
1. The Fed can manipulate interest rates to near-zero
2. The Fed can shove “free money” to the banks
That’s it. That’s all the tools the Fed has in its toolbox. Let’s consider what these tools accomplish in the real world.
Zero interest rates do not cause potential employers to hire unemployed people. Zero interest rates incentivize financial speculation (yield-chasing via trading risk assets) and malinvestment in projects that would be marginal if rates were normalized.
If capital cost 10% to borrow, only high-quality, low-risk ventures would attract funding or qualify for a loan. At 1% interest, the borrowing costs are so low that all sorts of high-risk, marginal schemes can afford to float loans.
Low interest rates also lead to money flowing to marginal borrowers. If rates were 10%, only those with good credit, credible income streams and collateral qualify for loans. At 1%, marginal borrowers (the kind who are most likely to default) qualify for loans.
All the Fed accomplishes with zero-interest rates is to build up a new wave of borrowers who will default. The Fed’s policy simply adds to the mountain of impaired debt that is crushing the global economy.
The Fed’s zero-interest rate policy (ZIRP) has impoverished savers and pension funds and provided disincentives to capital formation. In its anxious rush to lower the cost of borrowing, the Fed has stripped hundreds of billions of dollars of interest income out of the economy, and punished those who accumulate capital (cash savings) that is the bedrock of capitalism (a meaningless myth now that the Fed and Federal government are central-managing the economy).
Talk about unintended consequences. The Fed’s ZIRP punishes the prudent and rewards financier gamblers and encourages marginal borrowers who are tomorrow’s defaulters.
Pushing “free money” to the banks was supposed to do three things: It was supposed to enable the banks to lend lots of money at a premium and skim enormous profits that could be used to rebuild their ravaged balance sheets.
It was also supposed to spur consumption and investment, because money was so “cheap” how could you refuse to borrow more?
Lastly, it was supposed to enable homeowners to refinance their underwater mortgages at lower rates, creating disposable income that the homeowners would then spend on Chinese-made TVs, clothing, etc., creating “growth.”
As Mish Shedlock often points out, you can’t force people to borrow money, and offering marginal borrowers more debt does not make them magically creditworthy. The truth is that 95% of American households have taken on ever-rising debt loads while their adjusted incomes have been flatlined for decades.
The top 5% have improved their debt-income ratios, but the lower 95% don’t qualify for new loans or refinancing. Now that the banks are weighed down with bad debt and writedowns, they are wary of loaning more to marginal borrowers.
So the Fed’s “free money” that it shoved to the banks sits in reserves. It’s dead money. It isn’t funding wonderful new enterprises that are hiring millions of unemployed workers, it’s sitting as reserves, bolstering balance sheets, or it’s funding trading-desk speculations in the foreign exchange, stock and bond markets.
Maybe trading desks added a few traders to play with the Fed’s “free money,” but that’s like hitting the unemployment nail with a handsaw blade: it doesn’t do anything in the real economy or the labor market.
Fed Chairman Ben Bernanke’s famous “helicopter” from which he drops money into the economy is a misnomer. He can’t drop money into the real economy; all he can do is drop it into the banks, where it languishes as reserves or is used to fuel speculative bets in global markets.
The Fed is powerless, as its tools have no effect in the real world. It can fuel “risk on” market rallies with its trillions in “free money,” but it can’t lower unemployment or accomplish anything in the real economy except rob savers and pension funds of hundreds of billions of dollars each and every year.
It’s actually, pathetic, isn’t it? Ben and the rest of the impotent board are uselessly banging away at nails with their handsaws and chisels, while claiming to be financial wizards with unlimited powers. The next time the Fed unleashes quantitative easing, maybe the citizenry will wake up to the fact the Fed’s only power–to steal from savers in order to benefit insolvent parasitic banks–is actively destructive.
Judul artikel kedua Charles sangat jelas dan meringkas mengenai alasan-alasan mengapa para investor saham seharusnya tidak perlu bergantung demikian besar pada QE untuk meningkatkan nilai portofolio mereka:
Why QE May Not Boost Stocks After All
What if the Fed throws a QE equity-ramp party and the fireworks fizzle?
If there is one dominant consensus in the financial sphere, it is that the Federal Reserve’s $85 billion/month bond-and-mortgage-buying “quantitative easing” will inevitably send stocks higher. The general idea is that the Fed buys the mortgage-backed securities (MBS) and Treasury bonds from the banks, which turn around and dump the cash into “risk on” assets like equities (stocks).
This consensus can be summarized in the time-worn phrase, “Don’t fight the Fed.”
This near-universal confidence in a QE-goosed stock market is reflected in the low level of volatility (the VIX) and other signs of complacency such as relatively few buyers of put options, which are viewed as “insurance” against a decline in stocks. The usual sentiment readings are bullish as well.
But what if QE fails to send stocks higher? Is such a thing even possible? Yes, it does seem “impossible” in a market as rigged and centrally managed as this one, but there are a handful of reasons why QE might not unleash a flood of cash into “risk on” assets every month from now until Doomsday (i.e. December2015–the Mayans made one teeny addition error in Column 13).
1. Bullish sentiment. Though Mr. Market has been chained and whipped by central planning, he still harbors a mighty resistance to rewarding the majority in any trade, and with most traders firmly on the bullish side of the boat, Mr. Market might break free of the Fed’s chains long enough to capsize the boat.
As the saying goes, complacency leads to volatility, and stability leads to instability. Not all cycles can be voided by central planning, until Central Planners own 95% of every market (which seems to be the direction we’re going here).
2. The technical case for QE yielding diminishing return. The Keystone Speculator (among several analysts pursuing the same line of inquiry) made a compelling case for a Fibonacci sequence playing out as each QE is launched:
Starting with the time, QE1 was a 13-month pump, so note the beauty in the Fibonacci sequence occurring; 13, 8, 5, 3. Thus, the current 3-month rally would already have achieved its target based on this metric. For the point moves and percentages, continuing along in the sequence would target about a 20% rally for the current QE3 pump, with about a 250-point move off the 1270-ish bottom which places price in the 1520′s target area. “Don’t fight the Fed” is the mantra, but the current rally appears far along already.
In other words, the length and rise of each QE-goosed rally diminishes with each QE. If this pans out, the QE3 rally is within a few weeks of topping out and reversing.
3. The Fed has trained traders to front-run its decisions. The Fed has played a masterful PR game of describing its next round of intervention for months, keeping markets aloft in anticipation of the “free money” flood.
In one of the unintended consequences that central planning excels in producing, the Fed has trained traders in Pavlovian fashion to front-run “risk on” assets, i.e. buy stocks before the Fed actually announces its latest market manipulation. As a result, stocks have already run up strongly so the “announcement” bounce is modest; everybody tempted to be bullish is already all-in, and disbelievers are wary of jumping in on the downside of “buy the rumor, sell the news.”
4. The Fed has no surprises left. The market loves surprises, especially lavish gifts of free money from central banks, and now, 3.5 long years after the March 2009 lows in global equities, there are no more surprises left–unless the outright purchase of stocks by the Fed counts as a surprise. Interest rates are already near-zero, the Fed already owns a significant percentage of all long-term Treasury bonds (see The Fed Now Owns 27% Of All Duration, Rising At Over 10% Per Year, Zero Hedge), and it already bought $1.1 trillion in MBS and will keep buying more dodgy mortgages.
So what’s left to wrap up and deliver to a market addicted to free-money surprises every few months? Nothing.
5. Correspondent David P. explained the real mechanism at work in QE3–the enabling of fiscal “nearly free money” spending. The Fed creates money electronically and uses the cash to buy $45 billion of Treasuries every month. Since the Treasury now holds a preponderance of short-term bonds to keep interest rates down (as explained by Zero Hedge), it must issue an insane amount of bonds every month to roll over existing short-duration bonds and fund the Federal government’s $1.2 trillion deficit.
The only way the Treasury can get away with issuing trillions of dollars in bonds every year is if somebody buys and holds a big chunk of them, i.e. the Fed. Here is David’s explanation:
While Fed money printing doesn’t make it to the marketplace, Federal government spending does, and Fed monetizing makes it so that Treasury borrowing doesn’t negatively impact treasury markets and so Treasury rates don’t increase.
Fed directly enables the Treasury to spend its 8% GDP of borrowed money each year. That money goes right into the economy, no ifs, ands, or buts. And we know Bernanke is forever talking about how effective “fiscal policy” is – and he’s enabling it directly through his monetization.
The Federal government gets to borrow half a trillion effectively for free in perpetuity as the Fed effectively says, “Don’t worry about $500 Billion of that ‘fiscal cliff.’"
Dengan kata lain, jalur uang yang baru dicetak dari the Fed pergi menuju Treasuries dan melaluideficit fiscal spending ke dalam ekonomi riil. Jumlah “uang gratis baru” tersebut mengalir ke ekuitas mungkin jauh lebih rendah dari yang banyak diyakini oleh para konsensus, karena $500 miliar di antaranya merupakan komitmen untuk memungkinkan pengeluaran defisit pemerintah dan nampaknya merupakan level yang permanen.
What Do the Charts Say?
Hanya untuk menunjukkan kesia-siaan tindakan the Fed, berikut adalah beberapa komentar berharga berikut dengan grafiknya dari Tyler Durden di www.zerohedge.com:
1) It’s a Centrally-Planned World After All, With Ever Diminishing Returns
By now it is no secret that the primary beneficiary of the over $7 trillion pumped by global central banks into the financial system in just the past 4 years, and countless other trillions in miss-spent fiscal stimuli has been the stock market.
But what about the global economy: after all five years after BNP Paribas stopped withdrawals from their investment funds – the unofficial start of the Great Financial Crisis – whose primary beneficiaries have beencorn, gold, silver and brent – we should have seen at least some sustained impact in the economy if all Econ 101 teaches us about the virtuous business cycle is true, and if any of this countless money out of ZIRP air actually made its way into the economy instead of just the stock market. Well, let’s take a look shall well. Courtesy of Bridgewater we present a chart of coordinated interventions and their impact not on the stock market, but on the economy. What we find is that it was, is, and will be a centrally planned world after all.
Bridgewater’s take:
The three contractions in global growth that have occurred since the financial crisis were offset by heavy blasts of fiscal and monetary stimulation by global governments and central banks. But each wave of support has also had less impact on global conditions than the previous wave. We remain concerned that the ability of those policy responses to stabilize the situation is diminishing. The third wave stabilized global growth after last summer’s dip and allowed for the bounce in global conditions and markets over the early part of this year – but its impact on global conditions was more modest than that of earlier waves of stimulation. As the third wave has ended, global growth has again rolled over.
The scariest thing about the above chart? The ever lower global growth bounce as a result of ever increasing, or exponential, central bank intervention.
In other words, not only is conventional economics wrong about virtually everything, but the impact of whatever the real underlying story is, certainly not one that can be captured by econometric models which continue to falsely model out what is essentially a system of infinite complexity and soaring fragility, has increasingly diminishing returns.
Also, when we get to the point on the chart above where global growth is at or below zero irrelevant of how much “money” is pumped into the system, that will be the moment to shut the lights out, because it is then that the central planning fat finger which has to date mostly impacted various intraday inflection points in the S&P, will simply press CTRL-P. And not let go.
2) Complete Fed Failure: Retail Investors Pull Out Most from Domestic Equity Funds in Two Months
Just as we had suspected for months, Bernanke’s attempt to herd cats and to drive retail investors into equities is now a complete and unmitigated catastrophe. According to just released ICI data, in the week ended September 26, the second full week after the announcement of QE3, retail investors pulled $5.1 billion from domestic equity funds, following a massive $4.8 billion outflow the week prior, and the most in 2 months. This is also the sixth largest weekly outflow in 2012 to date, a year in which over $100 billion has already been pulled from equity mutual funds. And since we now know that Bernanke’s only motive for QE3 is to stimulate a wealth effect and to push everyone into the broken casino, where such trading farces as Kraft’s flash smash today, as Knight Capital’s implosion a month ago, and FaceBook’s IPO, not to mention the virtually daily Flash Crash in at least one name, have killed every last shred of faith in equities, it can be safely said that QE3 has failed three short weeks after being launched. As to where the money did go: why taxable bonds of course – not even the “dumb money” is that dumb to go where the Fed tells it to, and instead merely does what the Fed does: it keeps on frontrunning the Fed’s monetization of the US deficit, which is now going on for the 3rd year in a row. Eventually “this time may be different.” But not yet.
Sumber : Nico Omer
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