Fed raises discount window

Ok, so ECB finally starts signalling end of LTRO bullshit in what was it, November or December? (I remember how much I lost that day)… yesterday BOE minutes show disinterest (not exactly unanimous but more so than expected) in further extension of QE… now the Fed out of the blue raises the discount window… how are you ordinary Americans feeling about this?

I’m telling you now it’s a sign your adjustable rate mortgages could be going up soon, and quite dramatically at that, btw, if you don’t get the implications.

I guess ‘ordinary Americans’ don’t recognize ‘ECB’, ‘LTRO’, ‘BOE’ and ‘QE’…

…but they probably are thinking WTF…

-XT

‘ECB’ = The European Central Bank
‘LTRO’ = Long Term Financing Operation: an emergency liquidity scheme.
‘BOE’= Bank of England
‘QE’ = Qualitative easing: an electronic form of “printing money”

It means:

a) the fed and central banks think the fiscal crisis has passed.
b) economic growth is starting to heat up around the world.
c) the central banks now have to figure out how to unwind all the money they injected into the financial system before velocity picks up and inflation rears it’s ugly head.
The interesting thing now will be to see if they manage to unwind all this without triggering another recession.

The big risk coming up is stagflation (growth increases, inflation goes up, interest rates are pushed up to check inflation, killing growth. Repeat as necessary, perhaps for a long time).

This article is a good illustration of the potential problems: