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Fed policy

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Has Federal Reserve Policy Helped – Or Hurt – the American People?

By , Associate Editor, Money Morning • @TaraKateClarke -

federal reserve policy

U.S. Federal Reserve policy has been around since the central bank was established on Dec. 23, 1913. Its supposed purpose is to ensure the stability of the financial system...

But have Fed policies helped the U.S. economy -- or have they harmed it?

In the following video, Money Morning Capital Wave Strategist Shah Gilani breaks down the positives and negatives of modern Federal Reserve policy…

Don't Buy the Fed's New "Bribe-a-Bank" Interest Rate Policy

By , Special Contributor, Money Morning -

After seven long, strange years, we're looking now at the end of ZIRP as we know it.

And good riddance, too. It's been a disaster for the U.S. economy, the middle class, the housing market - just about every facet of American economic life has suffered from this fiscal disaster masquerading as coherent monetary policy.

But what's coming next has the potential to be even worse, though you'd never know it if you read the paper...

You see, the Fed counts on a corps of enthusiastic financial media cheerleaders to parrot its company line. In fact, The New York Times just published one of their explainers discussing just how the Fed would raise interest rates should it decide to do so.

Of course, like everyone in the Fed's "Amen Corner," the author carefully avoids the subject of just how the Fed would raise rates when there's $2.6 trillion in excess cash parked in the banking system - if there's a reason why rates are zero and borrowing money is virtually free, that is it.

Never mind that common sense (not to mention the Law of Supply) suggests that, when there's too much of a good, the supplier of that good loses the ability to raise its price without a massive increase in demand for the same.

But when did common sense ever stop the Fed or its slavish propaganda wing? It would be funny - if the consequences for every American's money weren't so dire.

Here's what I mean...

Keith Fitz-Gerald: "Federal Reserve Policy Is Past Its Prime, Ignores Middle Class"

By , Associate Editor, Money Morning • @TaraKateClarke -

KFG

Money Morning Chief Investment Strategist Keith Fitz-Gerald talked U.S. Federal Reserve policy with "Varney & Co." host Stuart Varney on FOX Business Monday morning.

Watch the video to see what Fitz-Gerald, a 33-year global market expert, predicts will come out of the FOMC meeting on Wednesday and Thursday (Sept. 16-17) - and why he's so fed up with Fed policy...

It's Not Time to Sell Everything… Yet

By , Capital Wave Strategist, Money Morning • @WallStreet_II -

The Fed One of my favorite lines is "I'm not the kind of guy to say I told you so – but if I was, I'd sure be saying it now." As far as saying "I told you so," back in the summer of 2008, in my "Friday Night Illumination" emails to my banker and trader friends, […]

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Here's What Rising Rates Really Do to Your Shares

By , Chief Research Analyst, Money Morning -

rising rates

There is a lot of lip service being paid to the upcoming stock market crash that we're supposed to expect once the Federal Reserve starts raising rates.

Every time we get close to a regularly scheduled Federal Reserve statement, financial pundits pontificate about the nuances of what the Fed Chair might say, not say, or imply.

It's like clockwork.

But one theme remains constant: any tightening of the Fed's easy monetary policies will spell impending doom for the easy-money-addicted stock market.

The only problem, though, is that historical facts just don't support the fear. In fact, there are opportunities for investment out there no matter what rates do... Full Story

The Fed Meeting at Jackson Hole Exposed Yellen’s Greatest Weakness

By , Special Contributor, Money Morning -

Stock market news today

At the recent central banker conclave in Jackson Hole, Wyoming, the two most powerful central bankers in the world, Janet Yellen, chair of the U.S. Federal Reserve, and Mario Draghi, president of the European Central Bank (ECB), gave back-to-back addresses on the same subject.

It was like a controlled experiment in the attitudes and capabilities of the two leading financial powers in the world.

The contrast could not have been more striking. Draghi was nuanced, technically proficient, and had some excellent policy suggestions. Yellen was rigid, backward-looking, simplistic, and made disastrous policy prescriptions.

A close examination of the two speeches is a master class in the current state of central banking and a window into a distressing economic situation facing the world today...

Will Yellen’s Fed Policy Stifle the Economy?

By , Money Morning -

Today (Friday), Money Morning Defense & Tech Specialist Michael A. Robinson appeared on FOX Business' "Varney & Co." to discuss the future of the Fed policy under incoming chairwoman Janet Yellen.

With the Dow Jones Industrial Average trading around 15,757, host Stuart Varney asked Robinson when he expects the index to reach 17,000.

Robinson's bullish - he said 17,000 will definitely happen in 2014. That's because, he explained, the underlying economy has a lot of strength. He pointed out two key numbers in the auto and housing markets that highlight the economic recovery.

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FOMC Meeting: What the Fed Policy Changes Mean For You

By , Contributing Writer, Money Morning -

The Federal Open Market Committee (FOMC) meeting ended yesterday (Wednesday) with two important changes to Fed monetary policy.

First, the central bank said it would increase the amount of quantitative easing by replacing Operation Twist, which ends Dec. 31, with outright purchases of long-dated Treasury bonds.

Under Operation Twist, every month the Fed sold $45 billion in short-term Treasury bonds and notes and bought $45 billion of long-term Treasury bonds in an effort to keep long-term interest rates low.

Because the Fed funded its purchase of long-term bonds with the sale of short-term bonds and notes, no new money was created.

However, outright purchases of long-term bonds will create new money-$45 billion every month-and, by concentrating its buying at the long end of the yield curve, the Fed should be able to keep long-term interest rates low.

The Fed also said it will continue to purchase $40 billion of mortgage-backed securities each month, creating a total of $85 billion in new money from these operations monthly.

That means QE4 is here.

Starting in January, the Fed will be more than doubling the amount of money it is pumping into the economy. Happy New Year!

Second, the Fed set unemployment and inflation "thresholds," instead of setting a date for when the central bank expects to be able to raise interest rates. What this means is that the Fed will not raise interest rates unless unemployment is 6.5% or less or inflation is more than 2.5%.

By setting thresholds where monetary policy might change, the Fed is attempting to improve its communications with the public.

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