I agree completely. It's entirely possible that fiscal rectitude and disciplined monetary policy (or even more fundamental monetary reform) will make their way to the top of the political agenda, and much more importantly the elite/intellectual/academic agenda. But we're not anywhere near such at the moment and it's only really conceivable in the wake of a dramatic system failure event. Exactly in the way that the Weimar hyperinflation and the Great Depression still dictate respectively the Bundesbank's and the Fed's behavior.
Global Macro Trading Journal
- Thread starter Daal
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I agree completely. It's entirely possible that fiscal rectitude and disciplined monetary policy (or even more fundamental monetary reform) will make their way to the top of the political agenda, and much more importantly the elite/intellectual/academic agenda. But we're not anywhere near such at the moment and it's only really conceivable in the wake of a dramatic system failure event. Exactly in the way that the Weimar hyperinflation and the Great Depression still dictate respectively the Bundesbank's and the Fed's behavior.
This has to be long term with massive amounts. Paul tudor jones is really big into this. Personally, I just don't want to compete in this field. As it is not the right time frame for me.
Most of the anti-fed rhetoric is just anti-Obama rhetoric. How many Republican politicians were complaining about Fed monetary policy back when Bush was in the WH?I can think of 2 and thats it. The Fed cut 500bps and exploded their balance sheet through that period
Its politically profitable to bash the Fed due things like BS and the AIG bailout(And the Lehman non-bailout for some I guess), this does not mean that a president would appoint a chairman that wants rates at 2% right away. The chance of something like that happening is really small, specially given that he would be already elected by then and thus has no need to mislead voters anymore
Its politically profitable to bash the Fed due things like BS and the AIG bailout(And the Lehman non-bailout for some I guess), this does not mean that a president would appoint a chairman that wants rates at 2% right away. The chance of something like that happening is really small, specially given that he would be already elected by then and thus has no need to mislead voters anymore
I think this rather misses the point. There's no doubt the Fed faces political headwinds, but also very real constraints on its ability to act meaningfully and maintain the illusion of control (specifically the bloated balance sheet, rock-bottom rates and the obvious diminishing returns from each successive QE). You seem to be focusing on the former while I dismiss them as (almost) irrelevant; certainly it's hard to argue the Fed has been holding back to date, while over and over and over again we've seen politicians cave at the slightest breeze of 'worse than expected' economic headwinds.
If Bernanke holds back on QE for now - and I believe he will and consequently that 2012 has a good chance to become a 2008 repeat - it will be because he knows his ammunition is limited and it's important to hold fire until the Fed can squeeze as much as possible from it.
Politically I actually think the Fed places itself in greater short-term peril by not easing. This obviously hurts the Democrats which is largely why the Republicans have taken the opposite position. With 'inflation expectations' on the floor neither the academic orthodoxy nor the unwashed masses of policymakers see any reason at all not to print full-bore. The GOP anti-Fed rhetoric will almost certainly lead to exactly no meaningful changes, but granted we can't be 100% certain of this.
I don't know if you caught Bernie Sanders' questions, but he was talking about altering the composition of either the regional Fed boards or the FOMC to replace 'industry insiders' with 'members of the public' - in other words to replace up-from-the-ranks guys who tend to be more hawkish (like Hoenig, Fisher et al) with dovish intellectuals appointed by the President. This type of thing is a genuine immediate threat to the Fed's independence being readily discussed in the halls of power, quite unlike going back to the gold standard or whatever.
??? PTJ is on record as risking very small amounts in tight time frames while attempting to build a position, saying things like "They said I caught the low, but they didn't mention I got stopped out six times first... never let them get into your pocket... I absolutely hate losing money... I have strong long term views on all markets but a very short term horizon for pain" etc.
But as Daal pointed out, in theory the Fed's ammunition is NOT limited at all... it is limited in the real world by political constraints / potential blowback from massive policy failure / losing hold of the psychological reins, which is the main thing I was driving at (before the discussion was veered into politics). Amusingly we wind up w/ similar conclusions though - the Bernank has reason to hold fire...
Yeah, the Fed is in a pretty shitty place right now -- potentially damned if they do (ease too readily and get blowback from another QE failure) or damned if they don't (let the economy sputter and increase the odds of hostile regime change).
Quote from darkhorse:
But of course you do. You're aggressively long gold and assert you will hold the investment portion of your position even if gold breaks all meaningful support points
The implication being that my position in gold is blinding me from seeing all the mountains of evidence that the USA is suddenly about to engage in an extended period of fiscal austerity and tight money, despite what seems to be a looming or actual global recession.
Believe it or not I actually consider this supportive of gold as it also finds a bid in times of credit stress, which Mellonism would certainly bring about - but leave that aside for a second. What evidence can you present exactly in favor of tightening policy? My evidence in favor of the opposite is the entire history of fiscal and monetary policy since Greenspan's appointment in 1987.
Moreso evidence that you are emotionally committed to a position, irrespective of what price action may tell you. If you are willing to hold onto gold regardless of where the price goes, you are saying either 1) you can't be wrong, or 2) you are willing to take one hell of a wallop, as yet undefined, before finally admitting you are wrong if such turns out to be the case.
I'm fully aware of the argument that gold and gold stocks can perform well in deflationary environments, and have made that argument myself -- explaining it to others on many occasions.
Hell, I'm not even gold bearish at this point -- I recently expressed the opinion that gold's surge on the horrible jobs number was a potential game changer, and that gold can do well against a deflationary backdrop.
Being gold "neutral" at this point, I am inclined to weigh out multiple scenarios, especially when certainty seems to be overpresent on one side or the other.
Re, tightening monetary policy as a result of conservative incoming, I don't have a table-pounding case for why it has to happen. I merely submit its possible occurrence as a plausible scenario.
As for evidence, the world is a very different place than it was pre-2008. Recall the horror with which conservatives reacted to Paulson's $700B request... the angry voices saying Lehman should be allowed to fail (before it did fail, bringing about catastrophe)... the huge game of chicken played first over the TARP money, and later over the debt ceiling in 2011... the rise of the tea party on twin pillars of hyper-moral and hyper-fiscal conservatism... the growing religious conviction on the part of the right that government is evil, and that the country is profligate...
I submit to you that, in the four years that have passed, the world has changed, and also grown more frightening. In times of fear and change, people are irrationally drawn to panacea ideologies even more so than they are in relatively peaceful times. The persistent myth of far right fiscal conservatives is that cutting taxes, cutting spending, and letting things "work themselves out" would have a chance if we only tried it. More and more of the red state public is inclined to believe that myth -- the myth that such could "fix" things -- because they are desperate to believe something, anything that sounds logical, and already had a conservative bent in the first place, and see the Keynesian easers flailing around like incontinent chimpanzees.
For the above reasons, comparisons to the Republican agenda and conservative laxness on the fiscal side pre-2008 are perhaps not the right model to work with, similar to the vital differences between slowdown in a normal business downturn and slowdown in a deleveraging.
730 pages in this thread, and at least half is speculative opinion on CB policy and action and/or theorectical economics. To paraphrase the thread's most love to hate person, ralph00, how does this translate into actionable intelligence?
GOC re gold:
As you said it yourself, there are several scenarios, so simply watch and see. I've played the guess where it's going game in the middle of a trading range on a smaller timeframe trying to extrapolate the longer timeframe move and IMO, it's almost never worth the headache. I don't see why you don't just hit bids once gold drops below the low 1500s and offers if it passes 1700s (or even 2000) for the upmove.
GOC re gold:
As you said it yourself, there are several scenarios, so simply watch and see. I've played the guess where it's going game in the middle of a trading range on a smaller timeframe trying to extrapolate the longer timeframe move and IMO, it's almost never worth the headache. I don't see why you don't just hit bids once gold drops below the low 1500s and offers if it passes 1700s (or even 2000) for the upmove.