Interesting Read On FOMC Announcement

By Lawrence

FOMC Announcement. DaytradingBias.comThe official Federal Open Market Committee announcement on May 1, 2013 contains an interesting statement that every market participants should think about.

The all powerful Fed says in its statement that, "The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes."

Throughout the financial crisis all these years, Fed has never change its policy direction. It always says that easing is necessary. It has not stopped even once in maintaining such position. How come all of a sudden that it changes its position to the possibility of both increase or reduce the pace of purchases?

If Fed sees signs of growth, it would have signal so.

If Fed sees signs of weaknesses, it would have say so too.

But we get this double-talk style statement from Fed instead.

There are two possible explanations why Fed is making such a statement.

First, giving Fed the benefits of the doubt, it can simply mean that it does not know what to expect next. This interpretation makes sense because whatever Fed has done so far (i.e. QEs), is just an experiment. Thus, they have no idea if it would work at all at the end. Obviously, after years of QE, they have finally entered the zone where QE is clearly doing nothing to help the economy except benefiting the elites.

It is a huge ego blow to the academic elitists like Bernanke and friends, assuming they are not guilty of knowingly know that this is the expected outcome. Hence the way the statement is worded.

Of course they can blame the government for not doing the part of being fiscally responsible to resolve the financial crisis. Yet, in this situation we have to question, either the moral compass of these Federal Reserve board members, or their ability to think like any normal human being that the government of course would not do its part to be fiscally responsible when the central bank is giving it a free pass to spend as much as it wants.

Second, if Fed is indeed working for the banking industry, or in a lesser term influenced by the industry, directly or indirectly, this statement would be the signal that the majority of the elites have successfully bailed themselves out of the crisis as of this point in time. This would be similar to the situation where a stock has crashed down hard in its price (think Facebook). Then of course, the banking industry would do everything to pop the stock price back up to bail themselves out.

As in the case of Facebook, I was able to tell easily what would happen and what can be done to pop the stock price back up. It is not a secret really. But in this case where Fed has pumped money in a way that has never been done before in human history, I have a problem in identifying the exact impacts of such actions. We are in uncharted territory in terms of economic policies. If it is all done to save the skin of the bankers and elites. This could be the biggest heist in human history ever.

Since we will probably never be able to tell if Fed has really crossed the line, there is no point guessing. All we need to know is that for both cases, the rally in the stock market is now officially over.

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