Tuesday, August 9, 2011

HOT: Fed Expects to Keep Short-Term Interest Rates "Exceptionally Low" into Mid- 2013

Translation: The Fed will print whatever quantity of money is necessary to prop up the Treasury market and stock market. The Fed is in full inflation mode.

Update: Stocks fall on the news. Dow is now down 106 points. Earlier, the Dow was up on the day.


  1. Does ''Exceptionally Low'' mean 1-1.5% yield on 10-yr treasuries as Nouriel Roubini hinted a few days ago?

    Is Fed really about to buy 100% of the treasuries, plus all the bad assets, PIIGS debt, etc? Nobody would go near them at 1-1.5%. What are they going to print some 2-3 trillion dollars just in 2012?

  2. Wenzel, do you also think the Bank of Japan has been in full inflation mode for 15 years because of their exceptionally low short term interest rates?

  3. Robert Wenzel,

    I would have expected investors to be excited about this. The move down is opposite of what I would have expected. I see at least 2 possibilities:

    1) a majority of the investment community has grasped austrian economics and understands money printing cannot lead to prosperity

    2) a majority of the investment community does not realize that to keep interest rates low they must print money. Rather than inflation targeting they were expecting QE3.

    What are your thoughts on this?

  4. I am a professional natural gas analyst that works for large energy companies and energy trading groups. I am also familiar with Austrian economics.

    Statements of intentions about inflation targeting are not strong enough to boost the market. It is to fuzzy/iffy with regards to timing. Definitive statements about spending(creating) 1 trillion dollars starting on x date to buy y securities over z ime period are what the market would want to see to really get things turned around. I am not saying I or most market participants think that creating 1 trillion dollars to buy mortgages is going to have good long term consequences...just that it would make prices of commodities and securities rise.

    No most market participants have not grasped austrian economics yet...yes the #'s are growing and they are becoming more influential in the markets.

  5. Perhaps I was a bit premature...

  6. And that is exactly what they did this afternoon. Print money and throw it at falling stock market, It was soooo obvious today that even the dumbest chump can see it.

  7. DOW closed up 400 this afternoon...Who did the buying?


    You are Owned.