Looks Like the Fed’s Been Duped – but It Hasn’t “Lost Control”

Rumors of the Federal Reserve's demise - in part because it was "duped" by the biggest bank in the United States - have been greatly exaggerated, though headlines would have us believe otherwise. MarketWatch declared in April, "The Federal Reserve Has Lost Control of the Financial Markets." The Wall Street Journal asked in June, "Has the Fed Lost Its Mojo?" Not only has there been no let up, but fearmongering headlines are being ratcheted up. Just last week, on Dec. 18, The Economist , with a graphic of a fire extinguisher in the shape of a dollar sign poised over rising flames, cautioned, "Despite the Fed's Efforts, the Repo Market Risks More Turbulence." Repos (repurchase agreements) are short-term borrowing facilities traded in the fed funds market, where banks and other systemically important financial players borrow from each other. It is frightening that they blew up in September - right under the Fed's nose. It's even more frightening that the turn of the year could put exponentially more pressure on repo rates, and spiking rates could force selling - with continued selling as margin calls force asset prices lower and lower. Once again, it looks like we're looking over the edge of an abyss at potentially huge market losses. But the truth is, the Fed hasn't lost anything. At least not yet. Maybe the Fed was duped by the biggest bank in the United States into restarting quantitative easing. Or maybe it saw what was happening and let it happen to scare the hell out of banks and overleveraged hedge funds. No one knows the truth there. The Fed's never going to tell. But the "Fed's lost control" narrative is fake news. Sure, one hand came off the tiller, but it still has control of the ship. At least for now. Let's take a closer look... Full Story Let's take a closer look... Tags: The Fed To get full access to all Money Morning content, click here About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free . Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors. Disclaimer: © 2019 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201. The post Looks Like the Fed’s Been Duped – but It Hasn’t “Lost Control” appeared first on Money Morning - We Make Investing Profitable .