The Fed

The Federal Reserve is the central banking system of the United States. They were established in 1913 in response to a huge financial panic in 1907.

During my lifetime their primary concern was inflation. In 2008 they were assigned two new areas of responsibility, they were the markets and unemployment.

In December of 2008 Quantitative Easing started.

November 2008

Fed unveils $800 billion plan to bolster lending, housing

March 2009

Federal Reserve to buy $300 billion in longer-term Treasury bonds

November 2010

Federal Reserve to buy $600 billion in bonds

September 2011

Federal Reserve moves to lower interest rates on consumer loans with a $400 billion debt-swap program

June 2012

Fed extends ‘Operation Twist’

December 2012

Fed to launch QE3 by buying mortgage securities

May 2013

Bernanke tells Congress ‘step down’ in QE could come soon

September 2013

Fed decides not to taper

 

The Dow Jones dropped into the 6500’s and unemployment went over 10 percent before QE was started. Since inception, bank to bank overnight rates are one quarter of one percent or less. Unemployment has fallen under 6 percent and the Dow Jones Index is over 18000.Our national debt is now over 18 trillion and that doesn’t include the 6 trillion the Fed used to buy our own debt.

When the money stops, the market drops. In the last six years we have not had a single 10 percent correction. The reason is the continuing influx of money from the Fed. We did have a 7 or 8 percent correction when the Fed said they would slow or stop QE in 2014.

The point I am trying to make here is that you, the little guy with a few thousand bucks in the market, need to be paying attention to the Federal Reserve. If you don’t the big guys will get your money, again.

The way they do that is by reading the market, the same thing you can do, and then going short, which you can’t do in a IRA or 401k.

There’s a whole lot more to this thread.

Stay tuned.

Dave Cappaert

Leave a Reply