They mind boggles when you you think of the Federal Reserve of America. I mean generally central banks are market volatility triggers that's it. Their purpose, apart from re-financing banks, is next to useless for the general economy; central banks offer no real support to business and everyday tax payers. But when they do make a decision in the markets, they cause market volatility with their meddling in market affairs. Which then effects business and everyday taxpayers, how? Central Banks in most cases, either allow asset bubbles to increase; thus ensuring of a severe bust, or they allow inflation to take hold. All and all, apart from governments that also can be detrimental to business, Central banks have no idea how businesses are run, therefor their own incompetence and misjudgment of asset markets, actually causes more harm to business and business conditions.
Of all the central banks in the world, the one that takes the cake (and gives most of it to Wall Street anyway) is the Federal Reserve bank of America, or the FED. Lead by probably the most incompetent, arrogant and possibly the most 'crazy' Federal Reserve chief in US history: Ben Bernanke.
In the last few days with the build up to the qualitative easing part two (QE2), when in 2008 the Federal Reserve bought every toxic asset that Wall Street and America's banks had to offer (and possibly overseas banks as well) then attempted to flood the US economy with liquidity (cash), except it kinda didn't work, in fact it was a complete failure. The majority of the money went straight into stock markets, not main street America. Yields fluctuated and declined re: the 30yr Treasury yield in April (4.74%)/May2010 when the stock market began it's correction we saw the yield collapse to 3.87% in August 2010. As Federal Reserve money pump operations have been going all year, the stock market has recovered and yields on 30yr Treasury have climbed upward at 4.04%
The markets had been unsure at what the Federal Reserve will do, rumours circulated that they may only buy incremented amounts of $5hundred billion to $5billion a month of asset purchases (printing money). This of course caused the US dollar to be bid (as the market saw the amount as too low) and we had some short covering of USD position/s and stock volatility.
But then this just came via Bloomberg, then picked up on FT.com and WSJ. Is that the Federal Reserve, it's almost unbelievable, has sent a memo to major dealers and they are:
BNP Paribas Securities Corp.
Banc (spelling error via NYFed page) of America Securities LLC
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
RBC Capital Markets Corporation
RBS Securities Inc.
UBS Securities LLC.
To ask them how much do you want?
Conclusion? Like I said, the Federal Reserve are either incompetent through and through, or they have gone insane. The rumour back to the market is that, of course, the primary dealers, or major market players (above) want the full $1Trillion offered. Why not, you then speculate that money back into the stock markets. But the nice flip side is if the Federal Reserve, as stupid as they are, send 1Trillion into Wall Street and/or other investment banks and the stocks markets go hard on a market buy-up frenzy. The bond markets will feel the pain, bonds will be sold, yields will go upward; as money surges out of the bond market and back into risk assets. So basically interest rates will move upward not downward if the Fed gives some free cash to Wall Street and others.
Main street gets taxed (inflation) again (+oil, living costs) on higher interest rates.
Obama must be shitting his pants, if main street America start to get a whiff of this, the outrage will be widespread.
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