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They’ll Probably Ask About This…

Federal Reserve Chair Janet Yellen just released her semi-annual Monetary Policy Report to Congress and will soon trudge up to Capitol Hill where, based on the chart below, she’ll have some ’splainin’ to do.

Question number one for those elected officials who aren’t otherwise preoccupied with such things as auditing the Fed will likely be, “Do you regret raising interest rates two months ago?”, for which Yellen will surely have an eloquent prepared response.

Global QE on a Grand Scale

Among the many other interesting (and, to varying degrees, alarming) graphics in Jeff Gundlach’s monthly commentary at Doubleline Capital is the chart below depicting the global, multi-year money printing extravaganza offered up by the world’s central banks.

Of course, the headlines this report is generating involve the predicted “real carnage” in junk bonds per Reuters and a holiday metaphor for the Fed getting cold feet next week, “It’s possible the Fed pulls another Lucy and the football,” Gundlach said, referring to Peanuts character Lucy yanking a football away from Charlie Brown (as shown below).

(more…)

Yeah. This is Going to End Well.

From this Bloomberg story comes more evidence that corporate America and the financial industry continue to push further into uncharted territory with debt levels at big companies surging past previous record highs and an increasing share being used to finance such society-benefiting activities like share buybacks and acquisitions as shown below.

Of course, the Federal Reserve has nothing to do with this alarming trend and former Fed Chief Ben Bernanke would be the first to tell you so, as he did yesterday with William Cohen in this offering from the NY Times Deal Book blog:

“The low rate of interest isn’t something that God gave us here,” he explained. “It’s something that is a feature of the economy.”

“So”, in the words of Jesse Pinkman (and Walter White), “There’s that”.

Rep. Brad Sherman (D-CA, Surprise!) urged Federal Reserve Chair Janet Yellen to postpone the central bank’s first rate hike until the middle of next year citing God’s plan for this sort of thing, a factor that has not likely been included in the Fed’s decision making model.

Sherman warned:

If you want to be good with the Almighty, you might want to delay until May.

Later in the day, Sherman commented on Twitter:

Don’t actually think God has an opinion on monetary policy, but if She did, She would agree that the FOMC shouldn’t increase rates in winter.

So, there’s that…

Druckenmiller Does Not ♥ the Fed

Hedge fund manager Stanley Druckenmiller has high praise for the Federal Reserve’s response to the financial crisis, but nothing good to say about the organization that didn’t see it coming and has now fostered new bubbles that are sure to end badly.

Notes Druckenmiller:

You would have thought we’d have gotten out of emergency measures… At some point, over six years, when you have zero rates and quantitative easing, you move investors out the risk curve, you cause emerging market governments … to act in ways they’ve never been able to act in history because markets wouldn’t have let them … you cause corporations to start acting in bizarre ways, buying back twice as much stock at prices two-and-a-half times where they were four or five years ago…

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