Release Date: May 1, 2013
For immediate release
Information received since the Federal Open Market Committee met in March suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.
"Fiscal policy" constituting a near-trillion dollar budget deficit is "restraining" economic growth?! 
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to see downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.
Scream louder. It'll work. Really.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
Four years of non-working policy so we must continue it.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.
We know nothing but stupid. The more we fail the more we will do and fail harder and more.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
Uh huh. A trillion dollars of purchases per year and nothing is happening.
What was that about an exit again?
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.
When the people have had enough Esther George might escape prosecution.
Maybe.
What a message to wake up to this morning....
The European Union intensified its campaign against U.S. Federal Reserve proposals to toughen oversight of bank units belonging to overseas lenders, warning of “potential retaliation” against the plans because they will drive up costs.
Heh Barnier, here's my answer: 
What Europe doesn't like is The Fed's intent to force foreign banks to set up holding companies under US Law domiciled here to contain their US operations. But this isn't just a good idea, it's actually required under our Constitution!
Specifically, Article 1 Section 8:
The Congress shall have the power.....
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
If Europe doesn't like this that's just tough crap; foreign banks don't have to do business here!
The problem that Europe has, and what is driving the complaints, is the fact that European banks have ridiculous leverage ratios which have not been taken down and in addition they are holding so-called "assets" at impossible-to-validate valuations. It's bad enough here, but it's far worse "over there" and this disparity has been exacerbated by the lawless behavior of the Troika during both the Greece and Cyprus "events."
This isn't over folks. There's a clean argument to be made that Ireland's banks are in fact insolvent and that their pension holders are going to get reamed in the butt. Spanish banks are still open to question and then of course there's the grand-daddy of them all, Deutsche Bank or as I have called them repeatedly, "DoucheBank."
Barnier argues in this letter that the Fed rule would have "significant economic consequences" for those institutions. Well, no kidding. They would have to segregate assets over here for their US operations where they can be attached and seized instead of playing games. If you remember there was a real consideration in this regard when Lehman went down, complete with alleged transfers out of US control and jurisdiction. This would be much worse for a EU-based organization that knew it was in trouble and would undoubtedly claim to be under foreign law and thus unreachable by US creditors.
Never mind the swaps problem, which underlays all of this at its core. Barnier is also upset about those, and with good reason -- they're how "his" banks have managed to claim they have "good assets" when price isn't exactly as represented. Goldman and JP Morgan don't like bringing swaps under public clearinghouse rules either, but as I have continually pointed out since 2007 there is only one way to drain the swamp when it comes to the games played in this marketplace -- force all derivatives onto public exchanges where nightly margin requirements can be publicly known and enforced.
You'll note how this has been evaded for the last five years, which tells you everything you need to know -- the institutions in question can't post the margin required against these positions as they do not have it. It has been my position all along that the entire purpose of these "positions" is far less economic than it is to make claims about other assets being "money good" when in fact they are not, much like the old insurance industry scam known as a "side letter" where someone "buys" an insurance policy with a letter in the company's drawer (undisclosed, of course) that contractually prohibits claims against the policy. This is fraud, incidentally -- but the reason that it's done is that the extremely cheap "insurance" allows the company "buying" it to claim that a particular risk is covered and therefore not material to their operations while at the same time the "insurance company" is able to obtain a "profit" without taking any actual risk!
This crap must be stopped as it is from this root that systemic risk is born and maintained.
Amusing.
First, we learn that The Fed "accidentally" released the minutes of the FOMC meeting to several Congressional offices and others, numbering about 100, yesterday.
We were not immediately told this, but the market "inexplicably" ramped on heavy volume at about 12:15 CT yesterday -- right when the so-called "accidental" release happened.
When a legitimate company accidentally does this they immediately release their earnings to everyone so as to limit the damage. The Fed, on the other hand, held off on this action and disclosure for more than 18 hours.
Number of indictments I expect to see for this? Zero.
Amount made by those who traded on this inside information? Who knows, but I bet it's not zero.
Now let's see if there's anything interesting in the minutes-that-aren't-really minutes themselves:
Real business expenditures on equipment and software appeared to slow somewhat early this year after rising at a brisk rate in the fourth quarter.
Yeah, like Alcoa for example...
Broad equity price indexes increased over the intermeeting period, bolstered by favorable incoming economic data. Option-implied volatility for the S&P 500 index over the near term rose slightly but remained low, at levels last seen in early 2007.
What came next?
Many participants reported that their business contacts were seeing some further improvement in the economic outlook. Firms reported increased planning for capital expenditures, supported by low interest rates and substantial cash holdings. Investment spending on productivity-enhancing technology was strong, as was pipeline construction in the energy sector. A few participants indicated that their contacts saw the level of uncertainty about the economic outlook as having declined recently, a development that could lead to increased investment expenditures.
Of course the NFIB says that an effective zero percent of small businesses think it's a good time to hire people. That makes lots of sense in this context.... right?
Inference about the labor force participation rate was complicated by its long-run downward trend.
Yeah, long-term there. Well, ok, since 2008/09. That looks like a step-function (twice!) to me, both driven by Fed policy.
Go figure.
A few participants noted that they already viewed the costs as likely outweighing the benefits and so would like to bring the program to a close relatively soon. A few others saw the risks as increasing fairly quickly with the size of the Federal Reserve’s balance sheet and judged that the pace of purchases would likely need to be reduced before long.
And these "few" individuals were?
Members generally continued to anticipate that, with longer-term inflation expectations stable and slack in resource utilization remaining, inflation over the medium term would likely run at or below the Committee’s 2 percent objective.
Yet another black-letter declaration of lawless behavior -- the objective set in law is stable prices, not those rising at 2% a year.
Congress, for its part, continues to fiddle.
We're in trouble folks.
Say what you will, the jury is back in and judgment rendered.
Bernanke's QE has done nothing material of value and he is now doing harm.
This is the only chart that matters when it comes to employment, and it sucks. Despite all the monetary games there has been no factual improvement in employment since 2009. Four years of this "experiment" and there has not been one iota of actual improvement.
The reason is that the problem we experienced in 2008 and 2009 was due to the gross and irresponsible expansion of economic leverage -- that is, debt, in the system as a whole. Transferring that into monetary policy to allow fiscal deficits without boundary is attempting to force a broken model to continue to work, just as one might press harder on the accelerator when their engine starts making knocking noises.
But if you do that instead of fixing the engine you're likely to next see a rod appear through the side of the block.
There is exactly one cause of this from a fiscal perspective, and it's health care. I know I keep pounding on this, but these are facts, not opinions, and are clearly-visible right here:
Now we have the Obama administration talking about "making home loans more available to less-than-prime borrowers"?
The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.
Oh really?
So 20% down is "unreasonable"? (The hell it is)
Lending to people "freely" with sub-700 FICOs is "too tight"? (The hell it is; the median FICO score is about 720 -- lending "freely" to those in the mid 600s is in fact lending to people with "D" -- that is, POOR -- credit!)
Facts are what they are -- the current housing market has priced in 3.5% 30 year money, which is ridiculously cheap. What happens to home prices if 30 year mortgage money returns to the lower end of historical averages around 6%?
That's easy to answer: The current $200,000 house turns into a $149,546 one -- that is, it loses roughly 25% of its value overnight!
If you bought at $200,000 with effectively zero down, and the average actual down payment when fees and closing costs are deducted is an effective zero in today's market, then you cannot sell and will lose the house if you lose your job.
The fact of the matter is that those people in the mid-600s have a modeled 25% risk of default and foreclosure! This isn't good policy, it's a disaster, exactly as it was in 2006.
That the Obama administration is pressing this shows that despite the claims of "an improving economy" they in fact know the economy sucks and are desperate to try to find something -- anything -- to provide a temporary boost into an impending disaster.
I have only one piece of advice given the macro environment plus the abject stupidity being displayed by our so-called "monetary and fiscal authorities": Run.
