As we await another FOMC statement, let’s do a quick 10 yr retrospective of Fed policy. The fed funds rate went from 6.5% to 1% early last decade focused on cleaning up the stock market bubble and an easy money induced credit bubble ensued that sent debt levels as a % of GDP to record highs. A bust followed as rates went up to 5.25%. To clean up the aftermath of easy money, the Fed embarked on another phase of easy money, this time on a level far above that ever seen before. We stand now today with an unemployment rate of 9.1% and a record high CPI index with the recent rates of change of 3.8% y/o/y and a core rate of 2%. Instead of calling a time out for an analysis of the track record vs their Congressional mandate of price stability and maximum employment, we’ll get today another bout of Fed induced easy money policy. Hold the applause, please. Not to be outdone, the minutes from the last BoE meeting reveal that they are ready to enlarge their asset purchase program because “there had been significant downside news on activity over the month…which had pointed to a synchronized slowing in global growth.” The pound is at an 8 month low in response. I digress. With the avg 30 yr mortgage rate at just 4.29%, purchase apps still fell to a 7 month low. Refi’s rose just 2.2%. The Shanghai index rose by 2.7% after China’s leading and coincident economic indicator rose to recent highs. In Europe, the Greek government today will discuss internally the demands of the EU/IMF fully expressed over the past week to them. French banks are trading poorly again with BNP in particular matching the lowest level since Mar ’09.
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