The FOMC again has moved to cheapen the cost of money still waiting and hoping for a different result. If only the cost of money was the impediment to growth. They announced its intent “to purchase, by the end of June 2012, $400b of Treasury securities with remaining maturities of 6 yrs to 30 yrs and to sell an equal amount of Treasury securities with remaining maturities of 3 yrs or less. This program should put downward pressure on longer term interest rates and help make broader financial conditions more accommodative.” They will also continue its reinvestment of MBS principal payments. On the economy they said growth “remains slow” using similar wording as they did in Aug and added “there are significant downside risks to the economic outlook, including strains in global financial markets.” They also remain sanguine on inflation as they always seem to be. Again, Fisher, Kocherlakota and Plosser did not support additional policy accommodation at this time. Bottom line, the FOMC gave the market exactly what was expected still believing in their monetary powers to cure the economic ills that ail us. When you misdiagnose the disease (hangover from too much borrowing/debt) however, you give the wrong treatment (to induce more borrowing/debt) and the Fed continues to perpetuate this and they wonder why the medicine doesn’t work. Refinancing is great but that doesn’t extinguish debt, it just alters its terms. We need to eliminate debt and encourage savings.
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