update -- trotsky, 10:50:32 03/30/11 Wed
The Federal Open Mouth Committee is Back
Suddenly there's a veritable flood of verbiage from Fed bureaucrats, and most of it contrives to sound a bit more hawkish than what we've heard previously. Plosser tries to out-Hoenig Hoenig, and even Bullard loses sight of the deflation bogey that was supposed to lurk just around the corner.
?ber-dove Evans opines - blissfully unaware of the irony - that '$600 billion may just be the right number'. The chopper pilot himself remains quiet, presumably gauging reactions and mulling over 'the incoming data'. Who knows, we may need a few 100 billion more from the hat those 600 bn. were pulled from.
Essentially we are left apprised of two facts after this deluge of speeches. 1. they are as clueless as ever 2. they won't start QE3 the very second QE2 stops. Too hot a potato right now, after all, no-one can eat i-pads and the natives seem to be getting restless.
We have a feeling there are a few markets that won't like that. One of those is copper, which is subject to jaw-dropping machinations in Shanghai, where property developers use vast copper inventories as collateral to finance real estate speculation. Dr. Copper used to hold a PhD in economics - now he holds one in excessive leverage.
A few comments on TEPCO, Japan's nuclear wasteland producer. Believe it or not, in spite of its $92 billion debt load, investors are still more sanguine about TEPCO's creditworthiness than that of Portugal, Greece or Ireland. Presumably this is because the ill-fated utility is rumored to be soon nationalized.
Meanwhile, over in euro-land, the creation of the apparently misnamed ESM (European Stability Mechanism) has immediately destabilized the situation further, as ratings agencies have seen fit to cut their credit ratings on the peripherals again. The reason: their existing debt is subordinate to ESM debt. As an immediate consequence, Portuguese bonds cease to be accepted as repo collateral by Clearnet.These days we don't even have to wait for the unintended consequences of interventionism anymore - we get them up front!
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