The Fed's March FOMC meeting: the surface is calm, but the undercurrent is surging
Press: Yesterday's (3.22) article was posted on the backup account "Liu Jiaolian Pro". Readers who missed it can click the link to view: "Bazi Jue, yyds" [link].
Overnight (around 2 am Beijing time) the Federal Reserve's March FOMC meeting ended. The conclusion is consistent with the market's most probable expectation: continue to raise interest rates by 25 basis points. Some funds speculating on the possibility of suspending interest rate hikes left the market in disappointment, and Bitcoin retreated from 28k to above 27k.
20230323-01 Figure: March FOMC meeting statement (compared with the previous meeting statement)
Judging from the statement released at this meeting, there are two major adjustments:
First, the macro background has finally stopped letting Russia and Ukraine take the blame. Instead, it has changed to emphasize the resilience of the U.S. banking industry, but it also brings concerns about uncertainty. This is a large modification in the second paragraph.
Second, the statement "it is appropriate to continue to raise interest rates" was deleted and replaced with a more flexible statement that "some additional policy firming may be appropriate". At the same time, the sentence "The committee will pay close attention to the information to be released and assess its impact on monetary policy" has been added in front of it. This is a larger deletion in the third paragraph.
At the post-meeting press conference, Powell made up for it again: First, he emphasized that the rescue of bankrupt banks is not quantitative easing (QE); secondly, he warned the market not to expect that the Fed will cut interest rates within this year.
Such a conclusion in line with the market's largest average expectation is mediocre. Powell's expectations management is really "no surprise".
It is also basically in line with what Liu Jiaolian wrote in the article [link] on March 8 on the official account, "the Fed has already started to reduce the rate of raising interest rates in February, slowing down to 25bp." interest rate. Of course, at that time, Silicon Valley Bank and Credit Suisse had not yet started to explode.
Judging from some data, we can now be more confident that as early as the end of last year, Powell may have known that he could not continue to raise interest rates by 50bp or even 75bp. If you raise it like this, before you poke others, you will poke your own people first. Therefore, at the FOMC meeting at the end of January, we saw that the Federal Reserve stepped on the brakes on raising interest rates without warning and slowed down the pace of raising interest rates.
We're all rear passengers who can't see the front windows. At that time, we were still in the dark about what Powell, the driver, saw ahead.
And in order to prevent everyone from guessing why he lightly stepped on the brakes, Powell looked around and found that the bank was about to explode, causing panic, running and trampling, which would be dangerous. So he deliberately sang eagles in February, playing tricks, frightening people that the March meeting will continue to raise interest rates by 50bp or even higher, so as to reduce people's vigilance, thinking that the external environment is good, the road ahead is unimpeded, and the Fed's The rate hike train can also speed up.
What Powell didn't expect was that Wall Street screwed up. We never know if it was unintentional or intentional. Anyway it was screwed up. He thought that everyone could continue to sing the show with cooperation, but Silicon Valley Bank exposed its feet.
According to the article on Liu Jiaolian’s public account, on March 12, “Officials of the Federal Reserve are waiting for something to happen!” "[Link], March 13 "Yellen rescued the market, Satoshi Nakamoto's creation prophecy retested, Bitcoin rebounded strongly" [Link].
It took only one weekend for the Federal Reserve to come up with the rescue tool BTFP. Although no one asked and no one said anything, it made people wonder if it had been prepared.
Some people swear by the data, saying that Bank of America gets most of the money from the Fed through the discount window, not BTFP. Yes, BTFP has just been launched for a week. There must be a process time for the bank's previous business, right? Over time, banks should gradually migrate their business from the old version of the discount window to the new BTFP.
In essence, BTFP is a "super discount window": a full discount with a longer period. (If you don’t know BTFP, you can review Liu Jiaolian’s official account on March 14th, “Fed’s interest rate hike turning point suddenly appeared, Bitcoin soared by nearly 20% in a single day!” [Link])
In addition, like the discount window, who is borrowing money from the Federal Reserve through BTFP is highly confidential. In the name of preventing public panic, they know which bank is short of money and runs.
Many people who have seen the ball throwing acrobatics expressed their admiration for the superb skills of the acrobats. Just by catching the ball with one hand, passing it quickly to the other hand and throwing it high into the air, an acrobat can keep N balls flying in the air.
The dollar is the ball that Powell catches and tosses. Powell is that consummate acrobat.
Even better, Powell is not only an acrobat, but also a magician. He can conjure up new balls at will to join the toss performance, and he can also instantly disappear the circulating balls.
In the statement of the March FOMC meeting, it was emphasized that the consistent quantitative tightening is still continuing. The Fed continues to reduce debt assets (letting them automatically mature).
But the other hand behind the magician quietly pressed the matter of discounting the debt assets sent by the bank in dollars.
After all, it is still two different things in name to rob money by yourself and exact tribute from younger brother (their robbed money)!
Therefore, after the FOMC meeting, Uncle Powell also said boldly that the rescue of banks is not quantitative easing, not quantitative easing, not quantitative easing. Well, the important words must be said three times.
Of course, there are many CFA professionals who wrote that BTFP is not QE (quantitative easing), and it is really not QE. This situation is really amazing. One of the functions of professional education is really to imprint "ideological stamps" on people's brains.
It is still what Peter Schiff said: When the Federal Reserve wants to QE, it is called QE when it releases water (liquidity); when it has to QE, it is not called QE when it releases water (liquidity).
After all, Uncle Powell has the final right of interpretation. If it is defined that the Fed directly releases water, it is called QE, but BTFP is not called QE.
The innovations of the Federal Reserve are all used to find various names for "water release".
This is exactly the same trick as the magician: while the audience is staring at the magician's hands, his assistants have already changed positions.
Pay attention to Liu Jiaolian and see through the shocking lies of the Federal Reserve! (For some reason, such a slogan suddenly appeared, let’s put it here as the end, thank you all old and new readers for your love, LOL)
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(Disclaimer: The content of this article does not constitute any investment advice. Cryptocurrency is a very high-risk product, and there is a risk of going zero at any time. Please participate carefully and be responsible for yourself.)