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Ben Bernanke's Monetary Policy
Bernanke's speech led to a rise in silver.

20 13, 1. 16, the highest price of the Bank of London rose sharply, and the lowest price fell to 30.36, closing at 3 1.02, up 0.58 from the previous trading day, with an increase of 1. Futures Bank 1306 rose slightly after opening lower, with the highest at 6,492 and the lowest at 6,409, and finally closed at 6,479, up 10 from the previous trading day, with an increase of 0. 15%, holding 2 19878.

In the early morning of 65438+ 10 15 Beijing time, Federal Reserve Chairman Ben Bernanke gave a speech at Gerald Ford School of Public Policy of the University of Michigan. It can be said that as the first appearance of the minutes of the Federal Reserve meeting in June+February, 5438, Bo Lao's speech received extensive attention from the market in advance. Judging from the content of his speech, Bernanke is more inclined to continue to maintain the current easing policy, which is not far from the market's previous expectations. Affected by this, the US dollar index fell slightly and silver rose sharply.

Chicago FED President Evans said on June 4, 20 14+ 14 that the Federal Reserve decided to link monetary policy with specific economic conditions in 20 12, which should help boost the economic recovery without causing inflation to rise. At that time, Federal Reserve Chairman Ben Bernanke's remarks were more inclined to "dove" remarks, hoping to maintain the existing monetary easing policy. This has greatly promoted the rise of gold and silver in the afternoon.

On the weekly chart of silver, after three consecutive weeks of oscillating operation, silver rose sharply on the first trading day of this week (2013.14-2013.1.20), and MACD broke through the daily line/kloc-0 in one fell swoop. At the same time, we can also see from the silver hourly chart that silver runs in a short-term rising channel. When silver touches the high point of 3 1.20, the contact resistance decreases slightly, while the MACD red kinetic energy column continues to shorten, and silver may face a wave of rising callback in the short term.

Bernanke's statement shook the market, US stocks plunged and gold hit a one-month low.

In the early morning of June 20th, 20 13, Beijing time, after the announcement of the Federal Reserve, Federal Reserve Chairman Ben Bernanke delivered a speech at the press conference, saying that the Federal Reserve may gradually reduce the scale of quantitative easing (QE) from the end of 20 13 and completely end QE in the middle of 20 14. Bernanke's speech caused the market to experience violent fluctuations: the yield of US Treasury bonds soared, the US stock market plummeted, the three major stock indexes all fell more than 1. 1%, the price of gold hit a one-month low, the dollar rose sharply, the yen fell, the Nikkei futures rose sharply and then fell sharply, and the US credit market generally plummeted.

The yield of U.S. treasury bonds soared, especially the five-year treasury bonds, to the highest level since August of 201/,and the yield of 10 treasury bonds reached 2.32%: the Standard & Poor's 500 index fell sharply in fluctuations, and the three major stock indexes all fell more than1.1%; The price of gold plummeted, hitting a one-month low of $0 1.348.50 per ounce. In the early morning of Thursday (2065438+June 20th, 2003), Beijing time, the Federal Open Market Committee (FOMC) issued a monetary policy statement. Subsequently, Federal Reserve Chairman Ben Bernanke delivered a speech. To the market's surprise, both the Federal Reserve's monetary policy statement and Bernanke's speech have changed the ambiguous style in the past, and the tone has become extremely clear, that is, as long as the economic situation meets the goals set by the Federal Reserve, it is possible to withdraw from QE as early as 20 13. The Federal Reserve seems to have realized that the financial market turmoil caused by the ambiguous exit policy will eventually affect the recovery process of the US economy, so it has taken "compulsory action" in the market.

At this meeting, FOMC decided to keep the benchmark interest rate unchanged, which is widely expected by the market. At the same time, it is predicted that FOMC is likely to maintain extremely low interest rates at least when the unemployment rate remains above 6.5%, the inflation rate is no more than 0.5 percentage point higher than the long-term target of 2% in the next year or two, and the long-term inflation expectation is still very stable. At the same time, FOMC decided to keep the size of the asset purchase plan unchanged, and said that it would increase or decrease the pace of the asset purchase plan when the job market or inflation prospects changed, so as to maintain appropriate policy easing.

The clear statement of the Federal Reserve is full of profound meaning.

Previously, the reason why the Fed deliberately blurred the expression of the exit policy may be because the exit cost is very high, and the Fed is an important means to pass on the exit cost to achieve a smooth exit in the future. After the monetary policy was clearly stated on Thursday, the sharp rise in the yield of US Treasury bonds and the short-term interest rate market has well illustrated this point, which also shows that the Fed finally lost in the game with the financial market. In the future, it seems that the Fed's exit strategy will definitely not be smooth sailing, and it will definitely experience twists and turns.

But from another perspective, it may also show that the Fed has some confidence in the future economic recovery prospects, especially in achieving key goals, namely, reducing unemployment and controlling inflation. Only when the U.S. economy fully recovers in the future will the changes in the 20 13 U.S. Treasury bond market be automatically corrected, the yield of government bonds will return to the normal level, and the Fed will not face a "dilemma" in the future.

However, the overall situation of the US economy at present can only be described as a weak recovery. The housing and manufacturing data released on Thursday (2065 438+03. 6. 20) were better than expected, but the latest data released by the US Department of Labor (DOL) showed that the number of initial jobless claims in the United States increased more than expected last week, indicating that the employment data is still in a state of repetition. Inflation, another key indicator of the Fed, is far from the set target.

Therefore, it must be recognized that no matter how strong other economic indicators are, the Fed will not take substantial withdrawal action until the unemployment rate and inflation fail to reach the set targets.

MohamedEl-Erian, CEO of PIMCO, the world's largest bond fund company, recently wrote that the overnight financial market reaction repeated the first-mentioned exit policy.

El-Elian wrote in the article that the fixed-income varieties, stocks and commodity markets almost collectively ushered in a wave of investor selling. The evaporation of liquidity in some markets has also led to more chaotic price shocks. The fierce market reaction highlights investors' concerns about the Fed's reduction of economic support. The performance of the overnight market basically repeated the scene that the Federal Reserve first mentioned QE slowdown a few weeks ago. Many people will guess that if the Fed refuses to turn back and sticks to its previous remarks, it is taking the expected risks.

El-Elian believes that what Fed officials need to do at present is to eliminate the rising excessive risks in an orderly manner.

El-Elian predicted that the market should adapt to the new triple shocks: liquidity, risk and term spread. Higher volatility will also aggravate risk aversion, including reducing the accumulated inventory of brokers and the interest of investors in returning to their home countries. El-Elian predicts that the market will be more volatile and the liquidity mismatch will be more serious in the future.

The volatility of financial markets may be even greater in the future.

At the same time, the Federal Reserve released a forecast report on the economic situation in the next three years at the same time as the meeting resolution. The content of the report is mixed. The Fed lowered its economic growth forecast for 20 13 years, probably because the short-term economy was hit by the US government's fiscal austerity measures, but the medium-and long-term prospects remained optimistic.

Therefore, from the perspective of economic fundamentals, this reduces the possibility of starting to withdraw from 20 13, but choosing 20 14 may be a better time for the Fed. There may be two reasons for the withdrawal of 2065438+September 2003 mentioned in the policy statement. On the one hand, the Fed is eager to end the current chaotic situation in the financial market, on the other hand, it is also a preview of its own withdrawal and observes the performance of the financial market under the expectation of withdrawal. Make a feasible plan for the real exit, that is, realize the smooth exit at the least cost.

What needs special attention is that the market and the Federal Reserve are more dependent on continuous signs that the real economy is indeed improving steadily. These signs include real and expected nominal GDP growth since then. In this case, the focus will shift to the upcoming non-farm employment data in June, and the market will be more sensitive to this data than before. In view of the excess liquidity in the US financial market that may be caused by the return of overseas hot money in the future, there may be more frequent and greater fluctuations in the financial market in the future.

In short, withdrawal from the Federal Reserve is a foregone conclusion, and the next issue is the timing and method of withdrawal.

Comment: Federal Reserve Chairman Ben Bernanke's intention

The market is waiting for a happy news, but obviously, Federal Reserve Chairman Ben Bernanke doesn't want to satisfy this wish.

20 13 On July 27th, Bernanke delivered a prepared testimony to the Financial Services Committee of the US House of Representatives. Bernanke said that the Fed will never presuppose the reduction process of the $85 billion monthly bond purchase plan. If the employment situation deteriorates, the inflation rate cannot return to the 2% target set by the Fed, or the financial market situation is too tense, the Fed may maintain the existing bond purchase plan or even expand the purchase scale.

The Wall Street Journal called it Bernanke's clearest speech ever.

This testimony quickly spread to the public, and two completely different versions appeared. Reuters reported that Bernanke was prepared to reduce the scale of bond purchases, because in his testimony, Bernanke did change his tune, saying that if the economic situation is better than the Fed's expectation, the central bank (Fed) may accelerate the contraction of the bond purchase plan.

In fact, Bernanke played his usual role of being vague about things he didn't like so much. Bernanke has always insisted on quantitative easing to help the United States seek economic recovery as soon as possible.

This is the fourth round of quantitative easing implemented by the Federal Reserve. The biggest difference from the previous three quantitative easing is that this round from 20 12 to 12 has no ending schedule and no quota allocation for purchasing assets. The reason why Bernanke doesn't set a timetable is that if things go wrong, he doesn't need to hold endless Fed hearings on whether to start the next round of quantitative easing again.

The news that this round of quantitative easing is coming to an end began on May 5, 20 13, when the US dollar soared in the early morning, and other high-interest currencies plunged against the US dollar that day. Before 5th, the Australian dollar was convertible into US dollars above 1.2 yuan, but then the Australian dollar fell below 1 yuan. Today, these high-interest currencies have not gone out of decline against the US dollar.

Two diametrically opposed views in the market reflect two completely different investors. Those who convert risky assets into dollars obviously want quantitative easing to end as soon as possible. In this way, the dollar will always maintain the expectation of appreciation; And those investors who have not changed into dollars in time or changed back into risky assets obviously hope that quantitative easing will end as soon as possible.

Quantitative easing is a tool to control liquidity when interest rate instruments are invalid. It allows the central bank to print money and inject it into the market, but it can flatten the central bank's account table because these banknotes buy specific assets.

It is precisely because the United States has used this tool many times that it has set a very bad example for central banks around the world. After that, Japan, Britain and the European Union all joined the central bank to intervene in the economy. But in fact, the central bank is the guardian of money, money is free, and the central bank should not succumb to the will of the government.

Quantitative easing can easily lead to soaring asset prices, and people will buy assets that have been cashed out for a longer period of time to obtain other income. This is why the price of raw materials will soar after quantitative easing.

Britain has made it clear that it will end quantitative easing, and Japan has not shown any signs yet. China said there would be no large-scale stimulus. Previously, it was precisely because of the Federal Reserve's unlimited liquidity injection plan that the exchange rate of the yen against the US dollar rose to an extremely terrible and dangerous situation.

In the long run, even if quantitative easing ends, the dollar will not become strong. A batch of assets purchased by the Federal Reserve will gradually expire, and these assets are all relatively large in scale. It is impossible to buy back these assets with the strength of the US government. It is impossible for the dollar to raise interest rates then.

Quantitative easing should not begin. It can't solve the fundamental problem, it will only make the government's performance look less bad. But what is worse than a policy that should not be started is to let it end when it should not. This round of quantitative easing has not solved the unemployment problem. The reason for the better performance of the data is that they count more unemployed people into the ranks of unwilling to work (that is, the labor participation rate). Unwilling jobs can't be counted in the unemployment rate data-Bernanke actually knows this very well.

Reuters Survey: Bernanke got high marks for his performance during his tenure.

In Reuters's survey, the interviewed analysts spoke highly of his overall performance during his tenure.

Bernanke led the American economy out of the worst financial crisis in history and the economic recession that has not happened for many years. Under Bernanke's leadership, the Fed has made some major reforms, including introducing a regular press conference system. In the past, the Fed was like a fortress, and it didn't even announce a policy change.

According to the survey, Bernanke scored an average of 8 points for analysts, out of 10, although he was accused of failing to find hidden dangers in advance.

Bill Cheney, chief analyst of Manulife Asset Management, said that Bernanke's performance before and after the financial crisis was basically correct. The reason why he didn't give 10 was that he failed to take preventive measures in advance, such as mortgage supervision measures. Cheney is one of the 53 analysts with high scores.

Joel Naroff of Naroff Economic Advisors commented that Bernanke was "an excellent crisis manager, but failed to foresee the crisis." Narov said that he was partly responsible for the collapse of the housing market and the financial market.

Although the American economy has stepped out of recession several years ago and the stock market has soared to a record high, it has not promoted the improvement of economic growth rate and has not benefited millions of unemployed people; The American real estate market finally began to recover, but companies with a lot of cash did not invest.

Bernanke is serious, and the Federal Reserve announced a reduction in QE.

Bernanke may finally convince investors that reducing quantitative easing (QE) is not a "wolf coming". At the last regular meeting of the Federal Open Market Committee (FOMC) when he was the chairman of the Federal Reserve, Bernanke and his team decided to gradually reduce the scale of their asset purchases, but kept strict control on interest rates.

Explaining the Fed's decision at the press conference after the regular meeting, Bernanke pointed out: "Even after this reduction, we will continue to rapidly expand the scale of our securities." He repeatedly stressed that starting to reduce QE is not the same as tightening monetary policy.

On Wednesday, FOMC announced that it would reduce its monthly bond purchases by $654.38 billion to $75 billion. Specifically, the Fed will reduce the monthly purchase of mortgage-backed bonds (MBS) from $40 billion to $35 billion, while reducing the monthly purchase of US Treasury bonds from $45 billion to $40 billion.

At the press conference, Bernanke reiterated that the unemployment threshold for further reduction of QE is 6.5%, but reaching this threshold will not automatically trigger QE reduction. He predicted that the Fed will gradually reduce the QE scale slightly in the future, and the time when the interest rate environment remains loose will "far exceed" the time when the unemployment rate reaches the threshold, especially when the inflation rate remains below 2%. He said the Committee was "determined to avoid inflation being too high or too low." He said that the actions taken by the Fed in the future will therefore depend on economic data, which makes it possible for the Fed to increase the QE scale in the future and even increase the QE scale again.