The Phaserl


“It May Take A Massive Program, Large Enough To Shock Taxpayers” – The Jackson Hole Post-Mortem

from Zero Hedge:

What happens next may put the past 7 years of simple “financial repression” and central bank failure to shame: in a lunch address by Princeton University economist Christopher Sims,“policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future.”

On Saturday, the 2016 edition of the Fed’s Jackson Hole two-day symposium came to an end, and as many expected, following long bouts of rhetoric, circular statements and hollow bluster, much of it contradictory, both the participants and markets remain as confused as ever.

In addition to Friday’s Yellen-Fischer one-two knock out punch, below are some of the key quotes, courtesy of Dow Jones:

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months.”

– Federal Reserve Chairwoman Janet Yellen, Friday, in a keynote speech at the conference:

When asked whether the Fed could raise rates at its meeting next month and again before the end of the year, he said Ms. Yellen’s speech “was consistent with answering yes to both of your questions, but these are not things we know until we see the data.”

– Fed Vice Chairman Stanley Fischer, Friday, in a CNBC interview:

“We should be on a program of gradual rate increases,” though he added, “We can afford to be patient” when it comes to acting.

-Fed governor Jerome Powell, in a Bloomberg television interview Friday:

“If the economy in the next few weeks performs consistent with my sense of the economy, then I think we ought to have a serious discussion at the September meeting” about raising rates.

– Atlanta Fed President Dennis Lockhart, Saturday, in a WSJ interview:

“If we had a lot of good news and we got into the September meeting and other people wanted to go, I could support that–but again I’m talking about one increase and no planned increases after that.”

– St. Louis Fed President James Bullard, Saturday, in a WSJ interview:

“The case for raising rates in the near term “has been strengthened.”

– Dallas Fed President Robert Kaplan, in a Bloomberg television interview Friday:

“I see a gradual…upward pace in interest rates as being appropriate.” As to when the Fed might raise rates next, she said, “I go into every meeting with an open mind.”

– Cleveland Fed President Loretta Mester, in an interview with CNBC Friday:

“We will act decisively as we move on… The bank will carefully consider how to make the best use of the policy scheme in order to achieve the price stability target. The “zero lower bound is no longer insurmountable” as a policy constraint “in practice”; “It is natural to assume another lower bound exists,” and the current rate is “still far from such a lower bound

– Bank of Japan Gov. Haruhiko Kuroda said at the conference Saturday:

“Negative rates work and are nothing extraordinary or immoral or absurd.”

– European Central Bank executive board member Benoit Coeure, at the conference Friday:

A Fed rate increase “might trigger some reactions from our side, but we will also respond to other determinants of inflation.”

– Bank of Mexico Gov. Agustin Carstens, in a WSJ interview Friday:

* * *

But while Wall Street has been busy trying to decipher what all these statements mean for the probability of a future rate hike, and whether one would take place in September, or December, or both, the real message that emerged was one noted previously: a common plea to their colleagues in the rest of government: “please help” as Reuters put it.

In other words, the push for a transition from monetary to fiscal policy was the true agenda behind this year’s Jackson Hole.

To be sure, while fiscal policy was not on the formal agenda for the conference, it was a steady part of the dialogue as policymakers thought through policies for a post-crisis world. One of the central worries is that households and businesses have become so cautious and set in their outlooks – expecting little growth and little inflation – that they do not respond in expected ways to the efforts central banks have made.

Or, as the WSJ unexpectedly reported a day before the Jackson Hole start, central banks are now failing, and as even Hilsenrath blasted “years of Fed missteps” have led to populism, and disillusion with the system. The result has been a historic collapse in confidence that the Fed “will do the right thing for the economy.

As Reuters’ Howard Schneider summarized in his Jackson Hole post-mortem,  “mired in a world of low growth, low inflation and low interest rates, officials from the Federal Reserve, Bank of Japan and the European Central Bank said their efforts to bolster the economy through monetary policy may falter unless elected leaders stepped forward with bold measures. These would range from immigration reform in Japan to structural changes to boost productivity and growth in the U.S. and Europe.”

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