No Longer Imminent, But More of the Same

The Fed is all about controlling expectations. Said another way, Joseph Goebbels would be proud. You see, the Fed needs to inflate but they want to make you think they won't. That's pure propaganda in the Goebbels style. They can spin you some of the time, dear reader, but can they spin you all of the time?

As anticipated, the Fed isn't interested in raising the Fed Funds Rate. The Feds wants, nay NEEDS, to inflate. There is a belief that there must be inflation or death of the economy. To a certain extent, this is true. A fiat currency system buried in debt cannot survive a deflation. But we'll cover more of this a bit later.

The Fed has stated it will keep rates low for a really, really long time. They're going to buy more "assets," which translates into "we're going to run the printing presses some more."

Get ready folks. Devaluation of the currency is the goal of the Fed, and whether they realize it or not, the government. It's coming. You can bet on that.

Hot off of the presses: FOMC Statement. If you're not used to tracking and reading these, you should. It's one of those tools to pay attention to (though not dote over like they do on Bubblevision).

Here's the text. Bold emphasis is mine.
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Release Date: June 24, 2009

For immediate release

Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
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Maybe we're just stupid over here at Dredd, but it sounds like they want to create a bunch of cheap credit and print more money. Somehow, that's going to fix an economy that crashed because it had too much cheap money. Cheap money and credit allowed people, businesses, and government to take on more debt that they could manage. So somehow, the Fed is going to stop the debt from crashing by creating more credit so that people, businesses, and governments cna get into more debt? Does that pass your logic test, dear reader?

Remember, they can print money and work on controlling your expectations through the media, but they can't stop where the money is going to flow. If the Fed handed you a wad of cash, do you think they could predict where you're going to spend it? If you were confident about the world, maybe you'd buy a new car. If you wanted some independence from your job, maybe you'd start a business. If the prices of food, materials and fuel were rising quickly around you, maybe you'd buy all of the food, materials and fuel you could get your hands on. You know, like the Chinese are doing....

Money tends to flow where it is will be "protected." I don't know if you know this or not, but food, materials, and fuel have never been worth nothing. We suspect that the Fed is confused, uninformed, or just plain lying about inflation. When enough money floods the system, the only things worth something will be things.