#FederalReserve Is In A Pickle

Posted on by
1

Here is the status of the Federal Reserve Board (Fed).

bbpickle

Background

Over a year ago the Federal Reserve Board (Fed) stopped Quantitative Easing, aka the buying of securities in order to pump money into the economy to stimulate it.

Feeling the economy was stable, the Fed just raised the Fed Funds Rate.  That is the interest rate the Fed charges banks.

Today

However, several other nations continued to lower their interest rates  and some have a negative interest rate policy, NIRP.  Here is more info on NIRP.

Japan – Why Negative Interest Rates?

Now the Fed is in a pickle because the Fed will look foolish if they reverse course and lower the Fed Funds Rate.

What Is Normal?

https://michaelekelley.com/2015/02/11/fed-inflation-target-is-abnormal/

According to the above website, if the Fed wanted the Inflation Target to be 2%, then the Fed Fund Rate should be 2% plus 1.44% or 3.44%.  Then 3.44% should be the normal Fed Funds Rate.

What Are The Fed’s Options?

How does the Fed get back up to the normal 3.44% Fed Funds Rate?  It can do one or both of these:

1.  Set the long-term interest rate to set a goal OR

2.  Keep unchanged or raise the Fed Funds Rate OR

3.  Offer another round of QE.

The best option is to have another round of QE which has the most influence and least fear while leaving the Fed Funds Rate alone.

Kelley Monetary Policy Rule

The Taylor Rule involves raising the Fed Funds Rate 1 percent for each 1 percent in inflation.  We have no inflation so the Taylor Rule is of no help.

The Kelley Monetary Policy Rule states the Fed Funds Rate will be increased gradually (such as .25% each quarter) and QE will be reduced gradually to zero at a rate inversely proportional to the Fed Funds Rate.

When the Great Recession hit, the Fed lowered the Fed Funds Rate AND offered QE at the same time.  Why can’t the Fed raise the Fed Funds Rate AND offer QE at the same time?

This should eliminate any fear by the Fed or the financial market and get us back to normal.

Good luck.

#Monkey See Monkey Get

Posted on by
Reply

This little guy has his mind made up.

monkey

Select your favorite caption for this photo.

1.  Swrwy pfft da bwnna dun nt nwdy ga hit.

2.  Slowly put the banana down and nobody gets hurt.

3.  I trained with these knives for 3 years.  Now I want to get paid.

4.  I ran out of gum so I chew on the red handle instead.

Enjoy!

To get new posts, click on the Follow button.  You will NOT get spam email.

#Valentine Viewpoint

Posted on by
1

I sometimes see myself in a totally different light than others.

valentines_viewpoint

My wife puts up with me despite the following:

o  Losing money in the stock market.

o  Misplacing my checkbook.

o  Trying to be funny.

o  Taking on too much.

Who would have known.

Hope you all have/had a great Valentines Day!

To get future posts, enter your email address and press the Follow button.  No junk emails will be sent.

#Nosejob

Posted on by
Reply

When you just gotta fix something.

nosejob

Select your favorite caption for this photo.

1.  Smoooooooooth.

2.  I can’t believe I went to a 4 year college for this.

3.  Good as gold, I mean silver.

4.  Crap, I think I’m stuck.

Enjoy!

To get new posts, click on the Follow button.  You will NOT get spam email.

Thirsty Throngs Thicker Than #SB50

Posted on by
Reply

When you just gotta have a drink even if there is a huge line.

crowds

Select your favorite caption for this photo.

1.  Man, that water looks good.

2.  Does it matter that we are down stream from that open pit mine?

3.  Now I know how humans feel like at the airlines check in counter.

4.  Hey, there is an empty spot on the end!

Enjoy!

To get new posts, click on the Follow button.  You will NOT get spam email.

Why GLD Is Bad and GOLD Is Good

Posted on by
1

Friends, here is why the GLD fund aka ETF is the worst investment if you like GOLD.

gold2confetti

1.  GLD Is Paper Gold

GLD is actually the SPDR Gold Trust Electronic Traded Fund.  It is a promissory note for GOLD.  It is backed by physical gold but the real ratio is controversial.  See

http://www.forbes.com/sites/afontevecchia/2011/11/15/is-gld-really-as-good-as-gold/#7b10e4f93ca1

2.  GLD Is Supported By The Fed Which Wants the US Dollar High and Gold Low

In a previous post, I discussed how the US Dollar and GOLD move in opposite directions.

In that post, I explained that the Federal Reserve wants to keep the dollar high so to do that, it depresses GOLD prices by encouraging the sales of paper GOLD.  See

https://michaelekelley.com/2015/07/20/dear-fed-plz-raise-gold-price/

3.  GLD is a CDO aka Tranche

Remember the Great Recession of 2008?  It was brought on by CDOs and tranches based on bundled mortgages.  GLD is a tranche aka a bundle of paper gold.

Statistics prove that 13% of CDOs before the Great Recession were sold to multiple buyers.  It is like selling an acre of land in Florida multiple times.

https://michaelekelley.com/2015/01/28/remember-cdos-theyre-baaaack/

4.  Paper Gold is rumored to be oversold by 200 times

You need to read this.

http://www.zerohedge.com/news/2015-11-30/paper-gold-dilution-hits-294x-comex-registered-gold-drops-new-all-time-low

5.  GLD Has Lagged Gold Mining Stocks Year To Date

NEM, a gold mining stock, is up 34% from 01/01/2016 to 2/5/2016.

Meanwhile GLD is up only 10% from 01/01/2016 to 2/5/2016.

That is probably because investment companies are avoiding GLD.  So NEM is a GOOD investment right now not GLD.

 

Here are Solutions when a Recession Comes

https://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/

 

Here is Some More Information

Lessons From How The Great Recession Happened and What A CDO Is

http://www.ase.tufts.edu/gdae/Pubs/te/MAC/2e/MAC_2e_Chapter_15.pdf

Good luck!

PS  I own NEM and care about you but I cannot be held responsible for your decisions.

#Interesting – Lonely Guy Speaks His Mind

Posted on by
Reply

Ever feel like the only survivor after a rainstorm?

cardboard_figure

This is what this little guy might say.

1.  Where is everybody?

2. I love the crisp, clean air.

3. Crap.  I should have turned off my sprinklers.

4. I better go inside before my legs get wet and crumple up.

Enjoy!

If you are feeling lonely, please call someone, anyone.

The National Lifeline number is (800) 273-8255.

 

#”Groundhog Day” Can Be Exhausting

Posted on by
Reply

After all the Photo Shoots, Press Interviews and Meet and Greets.

groundhog

Oh, yeah.  And putting up with Bill Murray.

Speaking of exhaustion, you probably deserve a rest too.

(Okay, all you animal experts, this is really a squirrel, but you get the idea.)

To get new posts, click on the Follow button.  You will NOT get spam email.

 

Fortune Features Final Phrase

Posted on by
Reply

The Fortune Cookie manufacturer has run out of fortunes.

fortune_cookie_mom

 

Enjoy!

P.S. Call your Mom.

To get new posts, click on the Follow button.  You will NOT get spam email.

Japan – Why Negative Interest Rates?

Posted on by
2

A number of countries have implemented a negative interest rate policy (NIRP).  Why?

neg_int_rates

Generally Central Banks try to stimulate their country’s economy by lowering interest rates.  This encourages banks and businesses to issue loans or take out loans.

Japan had a +0.1 interest rate and had nowhere to go but negative to lower interest rates in order to stimulate their economy.

Here is how it works.  Banks usually pay interest to use your money.  Instead a negative interest rate works like a safe deposit box. You pay to have the bank hold your money.

Unfortunately, people would rather have cash which results in hoarding and does the opposite of stimulating the economy.

For more information, see this website:

http://www.bloombergview.com/quicktake/negative-interest-rates

To get new posts, click on the Follow button.  You will NOT get spam email.