The Fed Returns to Saying Nothing and Markets Drift Lower
The FOMC statement released this afternoon went back to reiterating that nothing has changed, they will continue to keep things rolling along they way they are:
- ZIRP until at least mid-2015, because there are still some people in the U.S. that have some savings and that just will not do.
- Operation Twist will continue until the end of 2012, unless the Fed has not cornered the market on 10+ year treasury paper, in which case they will extend it again.
- Like good Keynesians, they are encouraged by the bottom bouncing in Housing and the channel stuffing in automotive, both are signs that consumption of bank credit may exist outside of the primary dealer network.
- They will be buyers of $40 billion per month in worthless mortgage-backed securities to ensure that the banks continue to have enough money to buy the U.S. Treasuries that the Government needs to keep the Ponzi scheme running and the EBT cards filled.
- There are still “significant downside risks” to the economy which roughly translates that sales of the new iPad mini will not be affected but Americans will have to forego things like heat this winter.
After the statement gold attempted a small rally but was quickly beaten back and the Chinese hedge funds came in to support the price in at $1700. Isn’t it amazing what you can do when you can create an infinite amount of money? At some point China will attempt to take delivery on those contracts now that Hong Kong Exchanges owns the London Metals Exchange and when that happens, no amount of financial adrenaline will stop the implosion