Free Republic
Browse · Search
Bloggers & Personal
Topics · Post Article

Skip to comments.

The Fedís Slippery Ascent of the Fiscal Cliff
Confounded Interest ^ | 08/20/2012 | Anthony B. Sanders

Posted on 08/20/2012 3:44:50 PM PDT by whitedog57

According to Bloomberg News, “Banks Use $1.77 Trillion to Double Treasury Purchases.” The gap between U.S. bank deposits and loans is growing at the fastest pace in two years, providing lenders with more funds to buy bonds and temper the biggest sell-off in Treasuries since 2010.

Well, perhaps it worked. The US Treasury 10 year yield finally came down today after several weeks of rising rates.

The Fed may feel pressured into more monetary stimulus and pushing the 10 year (and other Treasury maturities), yet it will do little good. The Fiscal Cliff facing the US is covered with ice.

The Fed has a difficult mission in trying to 1) reduce unemployment while managing inflation, particularly when the Obama Administration has gone on a binge of regulation and taxation. Unless the Administration (and Congress) make a decision to unshackle the economy, it is difficult to use monetary policy to make a decided difference.

Thus, The Fed’s ability to scale the fiscal cliff is limited and they will not receive any help from the Administration or Congress.

The Fed has a dual mandate to lower unemployment and manage inflation. But given the U.S.’aging population and the growth of government entitlement programs, The Fed is going to have incredible difficulty moving the employment to population rate above 58.4 (the level at which it has been stuck during the Obama Administration. That implies a NON employment to population ratio of 41.6%.

Complicating The Fed’s climbing of the fiscal cliff is the historically low M2 Money Velocity.

The final patch of ice on the fiscal cliff is that wages and salary continue to decline as a percentage of GDP.

(Excerpt) Read more at confoundedinterest.wordpress.com ...


TOPICS: Business/Economy; Government; Politics
KEYWORDS: cliff; fed; federalreserve; fiscal; gdp; uscrisis
Look at this guy's charts! VERY SCARY!

Obama/Bernanke - please go away!!!!!!!!!!!!!!!!1

1 posted on 08/20/2012 3:44:53 PM PDT by whitedog57
[ Post Reply | Private Reply | View Replies]

To: whitedog57

He that goes a-borrowing goes a-sorrowing.


2 posted on 08/20/2012 4:22:47 PM PDT by GenXteacher (You have chosen dishonor to avoid war; you shall have war also.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: whitedog57

Expirations of tax cuts, automatic spending cuts, higher oil and more on the way. Have fun. Think of it more as a free-fall down that fiscal cliff with the only chance being to grab the side of it and haul ourselves back up.


3 posted on 08/20/2012 4:59:36 PM PDT by familyop (Duncan Hunter or no-vote.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: whitedog57
Watching that debt clock is kinda' scary...

The Kenyan must go.

4 posted on 08/20/2012 6:32:39 PM PDT by ex91B10 (We've tried the Soap Box,the Ballot Box and the Jury Box; ONE BOX LEFT!)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Bloggers & Personal
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson