We all know that this current "recovery" is not a normal one. But they still use their economic models built on data from the past forty years to direct their economic projection and hence policy actions.
If they claim that they are tapering but still maintain $4 trillion balancesheet, then we know that they simply pretend that this "recovery" is real. Because there would be economic consequences if they predict the eventual faltering of this "recovery".
It is all about rational expectation. But this time, the fed tried to distract us from the rational expectation. ;-))
If Federal Reserve wants the stock market to rise, it will promise ease monetary condition. Otherwise, it will sound hawkish.
I wonder what the Federal Reserve will do once the asset-price-appreciation driven "recovery" finally run out of steam??
Walmart came out saying that they did not see the rise in consumer spending statistics translated into rising same store sales.
Maybe the ramp-up in spending came mostly from the well-to-dos who own lots of stocks.
While Federal Reserve painstakingly put the market into a trance state to believe that the currency "recovery" is a normal one and therefore will last even after the asset price appreciation stops, you might wonder where are all the money coming from to pump up the market?
I think that the funds come from OPEC oil money. That is why, for the current "bull" market to continue, higher oil prices will be needed.
The other consideration on Fed's warning about the rate increase is that they probably try to help the Wall Street dealers to attract more and more unsophisticated investors to "pay fixed" in Interest Rate Swap contracts.
The notional value of all currently outstanding IRS contracts could reach tens of trillions dollars. But nobody knows it for sure because these products are traded over-the-counter, i.e. not regulated by any official institutions from any sovereign nations.
It is not even regulated by the private consortium of global bankers -- the Federal Reserve.
Don't you notice that the world suddenly turn chaotic since the Sochi Winter Olympic Games? The global financial volatility has risen significantly ever since.
Do you believe that all the events unfolded since are pure natural coincidence? Or manipulated somehow?
May those people have shorted the market and are geared to reap hundreds of billions in profit once they brought down the global market. But they have to do it rationally. ;-))
Wall Street continue to collude with the Federal Reserve on painting false picture of the economy. But they are gradually running out of tricks. Sure, immigration reform could add a few points to GDP growth, as can legalization of drug trafficking and prostitution. But what happen after that?
Annexing Canada and Mexico? :=))
It is funny to see that the Wall Street interpret Fed's policy decision in any way they want. The fact is that once the stock market stop ascending, the GDP growth will approach zero or negative.
So for now, Wall Street takes whatever Fed says and spin it to be the signal of longing stocks. ;-))))) Monkey business? Indeed!
If the stock market keep jumping 20% per year forever, then we should see average 3-4% growth. But empirical experience has shown that the market goes up and goes down.
When it comes down, we could easily see zero or negative growth. And do not forget millions of workers who have lost full-term position and now have to settle with part-term positions with low pay and no benefit. How they will react if the GDP growth slides?
Bill Gross is right: the income inequality will become a big issue in a recession or even depression.