Chairman Bernanke keeps the money flowing…
Good day. Chuck got out of town right on time, as the temperature fell through the floor yesterday, dropping from a high of over 70 degrees on Tuesday to a low in the single digits yesterday. This change in temperatures became very apparent to me as I walked to my car last night without a coat (I have to learn to check the forecast before going to bed!). The Money Show kicks into full gear today, so if you live anywhere near Orlando I would suggest heading over to the Gaylord hotel to see the ‘Chuck and Frank’ show; both of them will be sharing their vast knowledge on the currency and metals markets with the attendees. And best yet, the show is FREE!
Bernanke and his buddies on the Federal Open Markets Committee decided to keep the free money flowing into the markets during the meeting which ended yesterday. Ok, the money is free but at these low rates it is as close to free as you can get. As I wrote yesterday, many in the markets were a bit worried that the FOMC would start closing the spigot on the flow of money, but Chairman Ben and his compatriots decided there are still too many risks in the economy to suggest an early ending to QE3. It will be interesting to see if an early end was even discussed, after news of a 50/50 split during the last meeting shook up the markets during January. The central bank left its statement unchanged saying that it planned on holding target interest rates near zero as long as unemployment remains above 6.5% and projected inflation stays below 2.5%. “Growth in economic activity paused in recent months in large part because of weather-related disruptions and other transitory factors,” the FOMC said in their statement.
So the Fed is blaming ‘weather related disruptions’ for the poor growth numbers in the 4th quarter. I know Sandy was devastating for many on the east coast, but could it be the cause of a negative GDP during the 4th quarter? Yep, GDP as reported by the Commerce Department yesterday morning dropped at a .1% annual rate during the last quarter of 2012. This was the worst performance for the US economy since the second quarter of 2009 when the US was still in a recession. You may not have heard about that poor GDP number, as the bad news was buried by the media. I read through several different sources of news each morning, and several of these ‘news summaries’ didn’t even mention the 4th quarter drop in GDP. I finally found a mention of it on page 6 of an 8 page story on the US economy, and even this story seemed to brush the number aside, stating the Fed believes growth will resume in 2013. But economists certainly didn’t do a very good job of projecting the 4th quarter number, with estimates ranging from gains of .3% to 2.1%, so why should we think they can predict what the number will be going forward. Another story I read pointed out that this was just the ‘first reading’ of the GDP numbers for the 4th quarter, and that this number will be revised in February and March (I can’t wait to see what creative revisions the folks over at the Commerce Department come up with for this one!)