Segment 1: Tax Tales SEGMENT BEGINS AT 00:37 Economist Jerry Robinson welcomes author, financial writer, and stand-up comedian Dominic Frisby for an enjoyable, stimulating discussion of his book, Daylight Robbery, as well as the role of taxes in history and the...
3PM EST UPDATE: Fed announces NO CHANGE in current monetary policy. Bernanke stresses future policy changes are DIRECTLY tied to the economic outlook. If economic outlook does not improve soon, current easing efforts will continue.
by Jerry Robinson, FTMDaily.com Editor-in-Chief
Wednesday is a big day for global investors as the Federal Reserve’s highly anticipated June meeting comes to a close and Chairman Bernanke will confront the media in his regular press conference. The question on every investor’s mind: Will he calm the markets by toning down the topic of “tapering” off current stimulus measures or will he advance the idea further so as to prepare investors for an eventual Fed exit from the markets?
BERNANKE NEWS CONFERENCE LIVE STREAM
According to a report released this week by the Financial Times, Bernanke is “likely to signal that the US Federal Reserve is close to tapering down its $85 billion-a-month in asset purchases when he holds a press conference on Wednesday, but balance that by saying subsequent moves depend on what happens to the economy.” Basically, the FT has reason to believe that Bernanke will hold his ground during Wednesday’s highly anticipated press conference.
So, exactly when will the Fed stop pumping $1 trillion (that’s $1,000,000,000,000.00) into the financial markets through its controversial QE bond-buying program?
In a speech last month (May 22), Bernanke rocked the equity markets when he merely suggested the eventual need to pull the plug on the Fed’s printing press. Instant speculation in the financial media caused major stock markets around the world to stumble from their inflation-induced upward march.
The losses were even worse for some select emerging nations, however, as many of their fortunes are intimately tied to the Fed’s loose monetary policy.
Last week, the IMF responded by lowering its official global economic outlook. It then nudged the Fed to maintain its current bond buying levels throughout the remainder of 2013. The IMF also had something to say about American fiscal policy: “The sequestration was a dumb idea and you better raise the debt ceiling this Fall.” Well, that wasn’t the exact quote, but you get the point. More of the IMF’s observations are reported on here.
So, here’s the problem
The problem is simple. The weight riding on Bernanke’s statements at this Wednesday’s press conference will have a profound impact upon both short-term and long-term investor expectations (not just in the U.S., but around the globe.) And when investor expectations are revised, a corresponding revision in the price of global equities immediately follows.
Regardless, America’s economic health is laughable.
The world’s Fed-addicted investors are scared of good news about the American economy as it may draw the final curtain on “QEternity”.
How sustainable is this type of financial mentality?
Or how about the fact that despite trillions of dollars in monetary stimulus by the Fed, our anemic economic recovery remains slow and painful.
When the printing presses don’t solve problems like they have in the past, what remedy must replace them?
I say America’s freak investor behavior is the “new normal” in an economy dependent upon constant infusions of fake cash — fresh off the printing press.
And this freshly printed money is injected into our wilted economy courtesy of the Federal Reserve. Can anyone deny that this dangerous, reckless, and quite frankly, unnecessary Federal Reserve system lies at the root of our distorted economy?
Ahh, but the families that control the banks that control the world’s central banks have been in the right business for centuries. They have no intention of altering the rules of the game. But we both know that they must live in fear of the advent of the internet and the spread of uncommon knowledge.
So what will Bernanke say tomorrow? My guess is that his temperment will be upbeat and his words will be spoken with conviction. In dealing with the “tapering” issue, I expect him to press the issue, but to provide clarity on its timing.
According to the Fed’s mouthpiece, Wall Street Journal reporter Jon Hilsenrath, a signal of the Fed’s intention to begin “tapering” later this year will be confirmed. In a June 7 report, Hilsenrath writes:
“Federal Reserve officials are likely to signal at their June policy meeting that they’re on track to begin pulling back their $85-billion-a-month bond-buying program later this year, as long as the economy doesn’t disappoint.”
Of course, there is always the slight chance that Bernanke could begin the “tapering” tomorrow. Several Fed officials have been urging the Board of Governors to slow the bond-buying at the June meeting. Although, no major economist to my knowledge expects the Fed to do this tomorrow.
Regardless, large amounts of money will be made by speculators who buy their convictions into tomorrow’s Fed press conference.