Tag Archives: Federal Reserve

Fed Tools: The US Federal Reserve’s Toolbox

This past week Janet Yellen, Chairwoman of the US Federal Reserve, gave her report on the state of the economy. The theme was “steady as she goes” with only minor adjustments to monetary policy. Here are some highlights from her text:Continue Reading

Where is the Price of Gold Headed?

The markets have turned in a strange performance over the past several weeks. The numbers on the economy came in weaker than expected with GDP down -.1% in April. Unlike other recoveries, spending growth has decelerated. Each year it takes a step down. This is not the way it should be. In all past recoveries, spending growth increased as the economy grew. Discretionary spending was up but 90% of that was due to inflation, especially in food and energy. Consumers are being forced to spend more. Our US deficit is running at about $17.3 trillion. The US Federal Reserve’s Balance Sheet has grown to $4.9 trillion. Surprisingly, the US stock market made a new all time high in the Dow and S & P. Gold, on the other hand, fell to its lowest level in the past 15 weeks.Continue Reading

How to Protect Your Portfolio

With the stock market averages making new highs every few weeks, investors are becoming increasingly edgy about what will happen next. These are unsettling times. We have a high US national debt running about $17 trillion. Added to this the US Federal Reserve has bought $4 trillion of bonds and mortgage backed securities from the big banks. They are now in the process of reducing their purchases, but they still must sell these securities back to balance their books. In addition they must continually issue new bonds to finance our debt.Continue Reading

The Fed’s New Policy Changes. What are they Telling Investors?

Could the Fed’s new policy changes signal the end of the bull market? There is a often quoted saying: “Don’t fight the Fed.” If that is the case, perhaps it’s time to step back and analyze exacting what took place this week. The Fed uses two ways to communicate with the public. It holds eight meetings each year. The Chairperson, in this case Janet Yellen, issues a consensus statement on overall Fed policy and issues some guidance going forward. The second and equally powerful communication comes from the minutes of the Federal Open Market Committee (FOMC) whose job it is to oversea the Fed’s market operations and steer interest rates in line with committee consensus.Continue Reading

US Federal Reserve Monetary Policy 2013-2014

Monetary policy is an important driver of economic growth. It sets in motion and controls, by and large, the supply of money available for lending and commerce. As 2013 comes to a close, the Dow Jones Averages, the S & P and the Nasdaq are setting new highs. On December 20, 2013 the Dow closed at 16,221.14, the S & P at 1818.32 and the Nasdaq at 4,104.74. Much of this spectacular gain was the result of US Federal Reserve Monetary Policy.Continue Reading

The Words Federal Reserve Chairman Bernanke Said That Turned The Markets Into a Tailspin

Bonds, bonds, bonds. It’s all about bonds. For those of you who don’t invest in bonds, they function in a special way. When the yield (interest paid) on bonds goes down the price of the bond goes up. When the crash of 2008-09 occurred, seven trillion of wealth disappeared almost overnight. The US Federal Reserve is like the bank of last resort and functions like a central bank in other countries. There were no more options open to stop the bleeding from the crash. The only answer was to pump money back into the economy and quickly. The way to do this was for the Federal Reserve to buy bonds and mortgage- backed securities from the banks and mortgage companies. The two largest holders of mortgages are Fannie Mae and Freddie Mac. They hold about 80% of all US mortgages.Continue Reading

Why the Fed’s Money Printing Has Not Lead to Higher Inflation

Over the past four years the US Federal Reserve has provided the economy with more than $3 Trillion. With all that money printing the logical conclusion is that we should be having super high inflation. But this is not happening. Our inflation numbers are running about 2% for core inflation (food and energy excluded.) The recent mini crash in gold prices is also confirming low inflation expectations. Gold prices usually rise during periods of high inflation as they did in the late 1970s following the jump in oil prices. All goods and services followed oil higher and set in motion a time of runaway inflation.Continue Reading