The Definition of Deflation, In Italics

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Don’t Use The ‘D’ Word

Down below you’ll see the press release from the Fed.

Predictably, they avoid the use of the ‘D’ word (D as in DEFLATION) like it had cooties or something. I guess they don’t want to scare us.

Strange thing is, I’m more leery about folks with that much power who are afraid to use the correct words when telling us what they’re doing and why.

You know – liars in power.

In any case, here’s what the jerks are saying now:

Federal Reserve Press Release

Release Date: March 18, 2009

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of evolving financial and economic developments.


It’s hard to write while I’m taking this medication, so allow TheFly to tell you pretty much exactly how I’m viewing this:

…As a result, the dollar is getting murdered. Watch it via UUP. And, treasuries are sprinting higher, as big moneyflees for safety. The initial market reaction is bullish. However, should treasuries continue to melt up like this, coupled with a crashing dollar, the market will get nailed to a crucifix.

If you are short stock here, beware of a blow off top, as the market presses your pain threshold.

The Fed cannot continue the reckless path of monetizing everything. This is NOT bullish for the markets. Do not be suckered into this rally.

However, if reinflation is the current theme, commodity related stocks may bounce here. The only commodity related stock I am comfortable with here is gold, via GLD or DGP.

and if you need more, Jesse adds the rest of it:

What was particularly repugnant was the co-ordinated actions in the market ahead of this announcement. This included a major bear raid on the precious metals, and the panic-covering of the financial shares before the official announcement. The cure of the crisis ought not to be an occasion for looting, fraud, deception, and personal enrichments by insiders who in many cases caused the problems which are facing today.

The US government is engaging in the same artificial tactics that lead to the tech bubble and the housing bubble. They are artificial because they are not accompanied by systemic change and meaningful reform. We are shooting the patient with morphine so they can go back to work without treating the disease.

The next phase of this financial credit crisis may be take down the US Bond and the dollar. That is what is known as a financial heart attack.

Discalimer: As you all should know by now, I am not recommending any buys or sells. My investing philosophy doesn’t allow me to play in rigged markets.

On a related note, gun sales are up.

From one moment to the next, I am still Jon.

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