DJ, Actually, it's Debenture, James Debenture. <g>
O.K., to make sure we are talking from the same page, read this short piece that Bill Fleckenstein was good enough to link in his Rap column. briefing.com
So, it is obvious that the Fed has been adding permanent reserves nearly every day, basically saying, make more loans and create more credit. Yes, they have been doing it all along, hence the world's record credit bubble we have in place right now. However, it is different this time (where have I heard that before? <g>) because the Fed says they have a negative bias. In other words, with a negative bias, you would expect the Fed to add and drain from reserves, at a minimum, equal handedly with some leaning toward drainage. Instead, the Fed is simply kicking out the jams to try to keep the bubble inflated.
The Fed is basically playing hypocrite. They are hoping that they can jawbone the stock market down a bit and the bond market up by pretending that they are serious about addressing the enourmous imbalances in the economy. In the meantime, they are telling the financial system that, nudge, nudge, wink, wink, we aren't really all that serious. Keep doing what you're doing. Hence, the stock market hasn't corrected much and the bond market vigilantes are still vigilant.
It is news when the Fed is upholding its Hypocritic Oath. <g> |
