Today, the Federal Reserve’s statement was virtually identical to the statement of the last meeting on November 3. Yet since the last meeting treasury rates have exploded to the upside despite the Fed’s purchases known as "quantitative easing."
The Fed’s direct action in the Treasury market has been nothing short of historic. The logic of the Fed’s various purchase programs was “sold” to the marketplace as a means to keep mortgage and treasury rates low…..or at least well-behaved and to create some “controlled” inflation.
Yet, since the last meeting 10-year rates are up close to 100 basis points! I am not sure what amazes me more — the fact that the Fed didn’t even MENTION the rate rise in today’s statement, or that many believe the various purchase plans have been “successful.”
How can a program that was designed to drive rates lower be deemed a success if rates are now sharply higher? Why is there so little clarity from an entity that is now among the largest holders of Treasury securities?
My conclusion is that the goal of Chairman Bernanke and the Federal Open Market Committee was to monetize the growing U.S. debt and generate future inflation. On the last score….generating inflation….I think time will prove the Fed highly successful.
- Video: Santelli discusses "fighting the fed" investment tactics.
