As I write this today (October 30, 2013), the US stock market indices are slightly lower, off record highs for all of them (except NASDAQ’s index, which still hasn’t come close to fully recovering from the tech stock bust of the early 2000’s).
Today, the markets anxiously await a pronouncement from the Fed on what it thinks of the current economic situation, and what it might do going forward, hence the pause in their growth to the sky.
As the previous post noted, the Fed is in a corner. It can’t even hint at removing its massive money printing programs (“stimulus” in Fed-speak) lest it causes more than just a pause in the ever-increasing prices paid for financial assets.
So, today the guidance will be more of the same. Expect a rally commencing about 2:15 pm, just after the Fed releases its statement. The brief pause is simply the result of a niggling crumb of doubt that the Fed might not do what the markets demand. Not to worry. It will continue its slavery to the financial markets so long as it is able.
Monetary policy in these United States, and thereby the world over, is driven by US hedge fund managers and banks. And well, so far as they are concerned, that’s as things should be. After all, a smoothly functioning financial system is obviously a prerequisite to robust economic growth, never mind that the US did quite well in developing its economic system long before the Fed came along to serve as the banker’s mules.
I wonder, does anyone at the Fed even remotely appreciate how utterly unstable their continuation unto eternity the banker accommodations will ultimately be?
No worry for today, though. Business as usual will put off the sobering reality for a while longer.
The Fed’s strategy will work until it doesn’t. And when it doesn’t, there will be no Federal Reserve left to save the bankers from themselves.