On January 3, 2013, stocks and gold
collapsed upon release of FOMC minutes from the December 11-12, 2012 meeting.
The bearer of Fed opinion was Jon Hilsenrath at the Wall Street Journal.
Zero Hedge noted after the sacred tablets were disseminated that it took
"Hilsenrath 12 whopping minutes to release a 589-word article analyzing
the FOMC minutes. At least we know one of the people who had the embargoed
version hours ago." The implication being the Wall Street Journal
was permitted to read the minutes before the transparency-minded Fed let the
rest of us know. Zero Hedge did not mention the FOMC Minutes are 7,044
words long and the market-moving FOMC discussion commences after 4,394 words.
It is possible that Hilsenrath did not read the Minutes at all, but was handed
a press release from one of the Fed's P.R. firms. The latter are best equipped
to lead the public into the Fed's pre-approved ditch.
There was, in fact, absolutely nothing in the Minutes (reading from word 4,394)
worth anyone's time. The discussion does not (as stocks, gold, Hilsenrath, and Bloomberg
inferred) intimate the Fed may cut short its money-printing scheme in mid-2013.
It was a meeting of confusion as to, not only how long the FOMC might continue
its wealth-destroying scheme, but also what it should buy, what should prompt
it to stop, and how it would identify an opportunity for a "smooth
transition" towards removing accommodation. In short, paralysis reigned.
The transition would include raising rates, a purely hypothetical discussion
since the Fed can never do so. The notorious free market is the party that will
decide when rates will rise.
The FOMC Minutes do not disclose who said what. Following is some handy
information that may save you time. Having read dozens of FOMC transcripts,
released five years after the meetings (why has the Fed only released
transcripts through 2006, in the year 2013?), you can take the following to the
bank: the Federal Reserve governors are the only voices that matter.
There are seven governors. They meditate in the Eccles
Building, are Washington toadies, and can all be counted upon to support
whatever the chairman wants. That is particularly true today, since the
governors are a pack of ambitious academics, so have never held an independent
thought in their lives.
The 12 regional presidents are window dressing. All
attend the meetings but only five vote at any one time. Thus, the governors
hold a 7-5 advantage when the FOMC votes. I take Jim Bianco's word for it (Bianco
Research) that Chairman Bernanke was embarrassed by three "nay"
votes in August 2011. Simple Ben does not want this to happen again. One
dissent is apparently not embarrassing since that is often what we see.
I take Jim's word for this nonsense, since, in a sane
world, Chairman Bernanke would be more embarrassed every time he opens his
mouth, given what comes out of it. But he's a lifelong bureaucrat, on campus
and now a civil servant, so form matters since that's all they've got. If it
were not for this needless decorum, opinions of Fed regional presidents could
be entirely dismissed. As it is, 2013 is a bumper year for Bernanke since three
of the five voting presidents express greater deference to Bernanke than Uriah
Heep ever hoped to reveal. These are William Dudley (New York: the New York
president is a permanent member of the FOMC), Charlie Evans (Chicago) and Eric
Rosengren (Boston). Esther George (Kansas City) and James Bullard (St. Louis)
round out the voting members in 2013. Both George and Bullard have independent
streaks, but neither is consistent.
Charles Plosser (Philadelphia), Richard Fisher
(Dallas), and Jeffrey Lacker (Richmond) make the news with occasional tirades
against the Fed's policy, but they are not voting in 2013. Also, their bark is
often worse than their bite. They make good copy but neither has consistently
voted against the majority.
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