Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
I read your postings with great interest. You have raised concern about the increasing frequency of Fed governors' speaking engagements. I get the clear impression that Greenspan is aware of the connection between speeches and moving markets. I share your unease about the Fed's communication agenda; it does not seem to be in place to purely enhance market participants' information about the Fed's intended moves, but rather propaganda to steer the crowd away from critically questioning structural issues. While babbling away constantly, the Fed is setting the agenda and everybody ends up reacting to minute changes in the trend and no-one questions the level of interest rates, the level of debt or the level of deficits. In its quest to avoid any short term shock to the system, the FOMC has decided to lull everybody into believing they got everything under control, thereby fostering an environment of delusion and lax risk control, or in fact, aggressive risk seeking behaviour. It can only be a matter of time before the system blows up, at which stage the Fed will be powerless and eventually completely discredited. At that may be a happy ending.....You posted some interesting facts about the Fed recently; have you read "The Creature From Jekyll Island"? If not, greatly recommended.
All the best,
London Minyan Arild
Thanks, yes of course. Today's CPI number is a good example. The Fed has conditioned the bond market to look at core CPI as THE measurement of inflation, and surprise, surprise, it was lower than "expected" even as yesterday's PPI should have given those number-guessers a good clue. Benign numbers, meaningless of course if you really want to know what inflation is, nevertheless a function of lower oil prices in June than May. I notice that oil averaged about $38 in June, but month-to-date in July it has averaged $39.50 so shouldn't bond traders be expecting a higher PPI and CPI next month? But they have been brainwashed by the Fed who's telling them that inflation is temporary.....
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