As
expected, the Fed tapered its purchases of mortgage-backed securities on
Wednesday to $15 billion per month and its purchases of longer-term Treasury
securities to $20 billion per month. That means total monthly purchases, which
were $85 billion last year, are now down to $35 billion. That’s a significant
cut. The Fed also cut the range of its
full-year 2014 real GDP growth forecast, from 2.8%-3.0% down to 2.1-2.3%. That
was no surprise, considering that GDP in Q1 was negative 1%, and it may
have been a bit of a warning......
·
Housing
in California is back to its pre-crisis peak;
·
Stocks
are at record levels;
·
Food
prices jumped 0.7% in May alone; and
·
Anyone
who drives knows that a tank of gas is far more expensive than it was a year
ago.
.........My point is that
the Fed and the media tell us things are better than they actually are.
Meanwhile, the Fed is taking secret actions that reveal where Yellen and
friends really think the economy might be headed.
The Fed’s New Tool: Reverse Repo……The Fed has announced that it’s using “reverse repos” as a new tool to
manage monetary policy. Don’t let “reverse” confuse you: Reverse repos are just
a way the Fed soaks up cash from financial institutions. The Fed is the
“borrower,” swapping its Treasuries for banks’ cash. You might call it the
opposite of quantitative easing: (link not in original article) reverse repos drain money from the financial
system…..There’s Much More Here…..
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