Monday, October 17, 2016

IS THE FED ALL DOVISH AGAIN?

A flurry of Fed talk from Yellen on Friday followed by Fischer on Monday seems to suggest that the Fed may tolerate low interest rate further even as inflation is trending up.
Here's what Yellen said on Friday. " If we assume the hysteresis is in fact present to some degree after deep recessions, the natural next question is to ask whether it might be possibleto reverse these adverse supply-side effects by temporarily running a 'high-pressure' economy."
Which many interpreted as Yellen may tolerate higher inflation before raising interest rate and thus as dovish as she could be without stating the obvious.
And here's what Fischer said on Monday. "It is not that simple for the Fed to coax interest rates higher in a world where, central bankers believe an aging population, weak demand and low investment may have undercut the country's and the world's economic potential"
So is the hawkish Fischer now sounding dovish? I can only zero in on the key words, such as aging population, weak demand, low investment. So the Fed is acknowledging the US and world economy is weakening but notice how he reword it as undercutting the potential?
So it comes as no surprise that gold and silver are trending up and US$ is trending down.
Meanwhile, about the retail sales which the government agencies touted as an improvement, especially in the auto sales and consumer spending, etc.
Here's one thing, If auto sales were good why are the motor vehicles sales falling as reported by the car manufacturers? And today Ford is reported to be idling 4 factories due to slowing car demand and rising inventories? (source: Zerohedge)
And about consumer spending, especially in the discretionary area like dining.... 8 restaurant companies representing 12 chains have filed for bankruptcy. According to the National Restaurant Association sales in August tumbled to its lowest since the financial crisis (source: Zerohedge).
Perhaps the Fed is finanlly waking up that everything has not been as awesome as they seem to be.
And if Yellen's game plan is to allow a pressure economy, we WILL have a hyperinflation.
Time to stack the precious metals and load the miners.

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