The big news this week is an astounding historical revelation useful in the present, but before that a few current events.
In Congressional testimony Chair Yellen acknowledged weakness in new economic data, but confirmed a continuing quantitative easing taper. Even Congressmen know to be delicate in debate with babes, and it’s a gas to watch their fidgeting caution with diminutive but flint-tough Yellen — especially at such an IQ disadvantage.
The Weather Channel still controls economic data, but traders are suspicious that Stephanie Abrams is covering for a sliding economy.
The most important new news: China has devalued the yuan, reversing expectations for strengthening. The purpose: to aid its exports while its internal economy slows in the beginning of reform, and to compete with Japan’s devaluation. The price: U.S. anger. Easy choice. All nations are trying to boost their exports and constrict imports. The result of this simultaneous impossibility: all are exporting deflation, low wages, and unemployment in a competitive spiral barely under control.
Although markets are nervous about the intentions of Tsar Nasty the Short in Ukraine, next week’s flood of March data is more problematic, rates here trickling up.
To history. Historical understanding is usually so delayed that it’s merely sustenance for argument, not much help with current decisions. Important matters of government are typically classified for a long time, to protect the embarrassed. In 1974 Britain released the Ultra secret, that we had read German military mail in real time throughout WW II, which made ridiculous every memoir written in the prior 30 years.
The Federal Reserve at the end of each meeting issues a “statement,” only a couple of paragraphs long and nearly opaque. Professor Bernanke introduced the practice of releasing “minutes” of meetings one month after the fact. These usually run about ten pages, but do not identify speakers, are paraphrased, and in pin-the-tail-on-the-donkey we try to judge the shift in consensus from the minutes’ mention of the number of speakers advocating a particular policy: “severalā¦ a fewā¦ a coupleā¦ manyā¦.”
The Fed releases verbatim transcripts of meetings, speakers identified, five years later. Last week, the entire 2008 volume on the Fed’s website. Five years is a long time, but not if you’re in the seventh year of a rolling crisis. I suppose there are some adults who do not remember 2008, or especially the week of the Fed’s meeting on Tuesday, September 16, 2008. Every school should teach the events of that week.
We let Lehman BrothersĀ face plant on Sunday, March 14. The stock market began to free fall. Tuesday night, after the Fed meeting — certainly known during the meeting by some — the world’s largest insurance company, AIG, joined the dead and the Fed had to revivify on the fly, still a huge matter of dispute. By Thursday Bernanke pulled the red cord in the corner, went to Congress to say that unless it came up with a trillion bucks, then within a couple of days credit cards would no longer work. Barney Frank allegedly arrived for that meeting by running up the Capitol steps with his shirttail out. The world had ended, simple as that.
You would not know the emergency from the transcript. Maybe you’d pick it up from the technical recitation by Bill Dudley of global collapse and the Fed flooding cash to support banks world-wide. The leaders were already deep in crisis response, the meeting a recess, a respite. Laconic, ho-hum as could be. Except for the idiots.
The transcript reads as a meeting conducted for the idiots, to let them have their say while the others saved the world. Most incredible: they are still not only idiots, but still there. These men should hope that their grandchildren never take a course on banking and read what their granddaddies had to say in the all-time deadliest bank run. All are presidents of regional Feds: Fisher, Plosser, Lacker, Bullard, and Hoenig (now FDIC), their only worry “inflation.” Clueless. Plus the obtuse and vacuous Tim Geithner.
The others — Bernanke, Yellen, Dudley, Rosengren (especially), and quiet Kohn — pick a 2008 meeting to read, find these inspired, brilliant heroes. And give thanks.
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Ā Link to the 2008 transcripts. Meetings and conference calls after September 16th became more and more tense. Extraordinary information so soon after the event, an inside look at how the Fed actually operates.
http://www.federalreserve.gov/monetarypolicy/fomchistorical2008.htm
Link to a short February 26th 2014 speech by Eric Rosengren, Boston Fed, with excellent charts. A fine rundown on the employment situation and the Fed’s large, multi-year miss forecasting inflation. Of all the heroes, Rosengren in 2008 understood the mechanics of the crisis best, and saw farther into the future.
http://www.bostonfed.org/news/speeches/rosengren/2014/022614/022614figuresandcomments.pdf
We do have a flicker of increasing bank credit. Maybe the most important weekly datum. Click on charts to enlarge.
10-year T-note, three months back. The tilt has been down, the reality of global weakness overwhelming the New Year optimists. Given weather-distorted data, we’re vulnerable to a surprise in new data — either way. The technical chart pattern is important: break 2.50% going down and we can fall a long way; break 2.75% going up and we’ll try 3.00% again.
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