Attention Robert Novak: The Fed isn’t at Neutral

Neutral Bias? Apparently so, according to the political pundit Robert Novak, in an otherwise cogent piece titled A Rate Cut on Hold.

Unfortunately for Novak, the Fed is not at a neutral bias. (Remind me: Does WaPo actually still have editors?)

If the US Central Bank’s most significant policy position are the Fed Fund Rates, than the second most significant element of their policy is the bias of their statements (Let’s say Repos are a close 3rd — tho it may appear otherwise more recently).

My issue with Novak is that the Fed isn’t Neutral — their statements have all-too-clearly clearly been biased towards fighting inflation:

"Before the recent global financial crisis began, the Federal Reserve Board under Chairman Ben S. Bernanke was ready to take a subtle step toward easier money in order to stave off U.S. recession fears. Ready for approval was a new Federal Open Market Committee (FOMC) statement ending the central bank’s neutrality and putting it on a bias for an interest rate cut. But international credit scares changed all that." (emphasis added)

Other than getting that small factoid wrong — and as we have seen from Novak’s prior work, getting significant facts wrong is never a bother — this is a fine, fine piece of writing . . .

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Source:
A Rate Cut on Hold 
Robert D. Novak
Thursday, August 16, 2007; A15
http://tinyurl.com/3y67w5

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What's been said:

Discussions found on the web:
  1. Bob commented on Aug 16

    He’s too distracted outing CIA agents.

  2. johntron commented on Aug 16

    talk about sentiment indicator….when Robert Novak’s opining about the Fed instead of Bushies, that’s what I call a bottom.

    Buy buy buy. haha.

    BR….you should run a correlation between your TBP’s traffic and the SPX…..I’d guess that there is a weak correlation….as doing market stresses TBP hits probably increase like the VIX.

  3. bastiat commented on Aug 16

    He’s too distracted outing CIA agents.

    That would be Dicky Armitage’s job.

  4. Deborah commented on Aug 16

    Robert Novak should be spending his time in a jail cell!

  5. Sven commented on Aug 16

    Holy cow…the USD/JPY just dropped like a stone.

  6. Marcus Aurelius commented on Aug 16

    Bob Novak is a declining market: All I need to do is say something more ignorant and unrealistic today than I did yesterday – it makes my historical self look relatively smart and informed.

  7. JWC commented on Aug 16

    Novak published the CIA agent’s name. Does anyone really think he would have done that unless he had an Okay from the power structure? I bet he lied about conversations he had with Rove re the same topic.

  8. ChicagoTom commented on Aug 16

    That’s interesting. The Chicago Sun-Times also runs Novak, and his piece was titled
    “Fed leans toward interest rate cut”

  9. M.Z. Forrest commented on Aug 16

    The Sun Times is actually Mr. Novak’s home. The Post and other papers some time pick up his column on syndication. Rarely do I see Barry just write with the ideological lens, but this is just silly.

    For those who prefer to know, the special prosecutor ascertained that Richard Armitage of the State Department leaked the information to Mr. Novak. Mr. Novak confirmed the information with the CIA who didn’t caution or protest her inclusion at the time. On what basis would you throw him in jail?

    Oh wait, this has nothing to do with truth.

  10. marketwhisper commented on Aug 16

    perhaps one should look at the spirit of the statement nuetral in the context of rate cut bias. Give him a small pass for being an outsider, but if the substance of his piece is right then it call sinto question some of the admin statments and Fed statements concerning the robustness of the underlying fundamnetals, no?

  11. john commented on Aug 16

    Thank you for enduring the pain of reading Novak so that I could be amused!

  12. rex commented on Aug 16

    Barry: I think you misread Novak (he’s not the clearest writer in the world). He’s saying the Fed was READY to move to neutral but didn’t because “international credit scares changed all that.”
    Of course, Novak’s column makes no sense anyway….

  13. Marcus Aurelius commented on Aug 16

    On what basis would you throw him in jail?

    Oh wait, this has nothing to do with truth.

    Posted by: M.Z. Forrest | Aug 16, 2007 12:40:33 PM

    ______________

    Intellectual buggery?

  14. nancy from LI commented on Aug 16

    fed funds rate are at effective rate of 4.50 despite the fed’s formal policy. I got news for you bulls, you ve already had your cut of 75 bps. enjoy.

  15. NoFate commented on Aug 16

    I knew Novak was a complete idiot when it comes to politics, but didn’t know he was equally talented in financial matters…

    I prefer Jon Steward’s pet name for Novak… “douche bag.” There’s really nothing more I can add to that description.

  16. NoFate commented on Aug 16

    I knew Novak was a complete idiot when it comes to politics, but didn’t know he was equally talented in financial matters…

    I prefer Jon Steward’s pet name for Novak… “douche bag.” There’s really nothing more I can add to that description.

  17. Tom B commented on Aug 16

    I think I’d rather hear what Lindsay Lohan has to say about the Fed. The visuals would be better.

  18. Jenna’s Bush commented on Aug 16

    On what basis would you throw him in jail?

    How about breaking the law? It’s a crime to reveal the name of a covert CIA agent, regardless if his alleged source at the agency “didn’t caution or protest her inclusion at the time”.

  19. Mike commented on Aug 16

    Perhaps this is a peremptory “shot across the bow” warning the FED that if a rate cut is offered, it will be perceived as “bailing out the hedge funds.”

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