US Federal Reserve

Via Scotiabank's Guy Haselmann,

A well-known central banker once said to me, “if you don’t have a Plan B, then you don’t have a plan”.  When he spoke those words over a year ago, he was referring to the Fed’s lack of an exit strategy from zero rates and its QE-swollen balance sheet. He was telling me that the Fed was so focused on bettering ‘today’ through aggressive stimulus that it could not worry about ‘tomorrow’. He speculated that central banks were “terrified of looking as if they were doing too little”.

For the latest confirmation of just how trapped in a corner of its own making the Fed now finds itself, look, or rather read no further than the presentation given moments ago by St. Louis Fed president James Bullard before the CFA Society in St. Louis which was circular, confusing, illogical, and thus a splendid summary of the Fed's "thinking" from beginning to end.

It was just last month when we checked in on BofA economist Ethan Harris who, in May of 2015 derided the “perma-bear” crowd for crowing about an abysmal Q1 GDP print.

“Looking ahead, it is much too soon to declare victory, but we expect the data to improve in the months ahead as seasonal and other distortions fade,” Harris concluded, suggesting that if the double-adjusted data continued to “improve”, BofA’s economics team would be able to proclaim that the bears had been vanquished once and for all.

As you might have noticed, the Fed made a policy mistake in December.

We could delve deeply into the specifics, but quite frankly it all boils down to this: Yellen hiked right into a recession.

There’s more to it than that obviously, including the fact that EM is circling the drain amid the global commodities rout, meaning excessive USD strength is especially damaging and the fact that the uncertainty swirling around the depth of the ongoing yuan devaluation has markets on edge from Shanghai to London to New York.

Submitted by Bill Bonner via Bonner & Partners,

Investors are losing confidence...

They’re probably losing confidence in corporate managers, for instance.

Who wants to own stock in companies run by numbskulls who buy back shares in their companies at record prices just before a major selloff?

Or maybe they’re wondering whether the world’s $200 trillion in total debt (roughly 300% of total output) can possibly be paid back?