Saturday, August 24, 2013

What's Next for the Federal Reserve?

Jim Bianco (Marquette ’84) is truly one of the best economists on cable television. This week he was on CNBC discussing the Federal Reserve and the markets.

His comments on the current state of the fixed income markets are spot on…. Simply put, he believes that the Federal Reserve is convinced it is completely correct. “They believe they know better than market participants and are frustrated that their explanations are not being ‘understood.’ The Federal Reserve believes the problem is one of communication and nothing more.”

He continued, “The markets are not having any difficulty understanding the Federal Reserve’s point of view. They simply disagree with it. No matter how many times Bernanke explains his position, the markets see tapering as a form of tightening. In the past, when the Federal Reserve disregards market opinion in favor of their own, it generally ended badly. Could that be happening again?”

Watch the video, it is an interesting dialogue between Rick Santelli and Jim Bianco (a couple of Chicagoans discussing the Federal Reserve and interest rates). These two are not afraid to call it like it is! Also, a nice shout out for Marquette and Jesuit universities...