Fed Just Who We Thought They Were

Fed day thoughts and stuff :

Spoiler Alert: The Fed has a policy of increased transparency.

The Treasury (TBAC ideas) is going with negative rate bidding, its all the rage around the globe ya know, and slowly moving towards FRNs. Little Miss Libor won't be asked to the dance so look for a big push to ramp up GC Futures. Eurodollars will be asked to spend the next 7 years rolling off into the sunset. The long slow good-bye. The fact that Treasury wants to "pay floating" with rates at the acme of a 30 year run is just something else to tell your grand-kids about when they come to visit you at Del Webb. It would behoove them to "git 'er done" before the Fed gives up on forward promises as the alternative is a Trillion dollar Bill auction and a Santelli combustion on a weak bid to cover. Uncle Sam giving everyone a peek through his bath robe on roll over risk, given where other nations are, is kinda funny. The Treasury does know they have the plates to the $100 bill in the basement right? Any-who, the official line is "667B needs to be issued to the public to remain cash neutral." 667B....Congressman Paul ?.. (Slaps Face, breaks open smelling salts)..are you ok?

Finally, the last few days has seen an increase in the "Fed policy not working" "We need higher rates" crowd. There's an easy comparison for central banks that raise rates too early and restrict the growth of money in times of trouble...its called Europe. That is totally different from CB efforts to distort the natural order of markets or be the overwhelming dark matter in the universe to gravity. There is no "Lehman moment" boogie man out there but governments encroaching in the markets is the result of years of (and ongoing) bad behavior at financial institutions and its payback time. TAG expiring at the end of the year is a good example. Deposit insurance has a perfect record of encouraging shenanigans and now the powers that be have to decide to pull it back or not.  In many ways, TAG is the mother Alien that spit out the London Whale. Lets just take the government guarantee training wheels off and see if the kid stays on the bike. The mistakes are more skinned knees and banged heads than the 2008 heart attack. It boils down to a simple thing called risk/reward. We hear a lot about risk now and not wanting banks taking any. Risk is not the bad guy here.  The anomaly is players want decent return for taking government backed "risk"- just ask Italy. If its backed, you get zero-why is that so hard to understand? If there's risk, that is, if an investment finds itself subject to the natural order of the world outside the matrix...you might make something greater than zero. Might. I know scary, ain't it? It'll be ok, trust me.

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