If Barack Obama is the Answer What Again was the Question?
By Marc L. Flaster
Texas Insider Report: NEW YORK New York Just released are the minutes of the Federal Reserves Open Market Committee (FOMC) Meeting in September 2008. That was the meeting just after Lehman Brothers collapsed a result of the FOMC 
debating society inability to come to a decision on what it was going to mean in the infinite scene. You have to read it to believe it.
In 1775 the Continental Army was encamped on the shores of the Potomac shivering in the cold short of rations and ammunition. Washington sent several emissaries to the siting Continental Congress requesting money to clothe and feed his troops. He was planning to carry the conflict for liberation from the British forward.
The Continental debating society argued the pros and cons of continuing the fight while the good General Washington damned the torpedoes and put the ship on a course to victory. There is even a painting of him leading his troops across that river which we all now know never did take place in that same manner.
Just released are the minutes of the Federal Reserves Open Market Committee (FOMC) Meeting in September 2008. That was the meeting just after Lehman Brothers collapsed a result of the FOMC debating society inability to come to a decision on what it was going to mean in the infinite scene. You have to read it to
believe it.
Our (then) new Fed Chairman Ben Bernanke told jokes august members poo-pooed the event as just a mild disturbance in the financial atmosphere. They had survived the demise of Bear Stearns; therefore they were in the been there done that frame of mind.
Of their prime concern was inflation. Yes the Fed is THE inflation fighter always at the ready. A tiger in the tank so to speak.
These minutes reconfirm that markets work in wondrous ways and as soon as you introduce a traffic cop to decide which way the traffic should flow it is unlikely that the regulators choice will avoid catastrophe.
The management of monetary policy has been all about wait and debate. No one can take the merit badge away from now-former Chairman Ben Bernanke for his bold action not after the fact. But the Fed did not foresee nor prepare for anything that led up to the catalytic collapse of the housing market.
Now that it is clear that the promised reward for suffering through 5 years of managed interest rates has not had the desired effect the group remains stuck in its own muck. Ben told us all he was a student of the Depression and therefore the right man for the job as the free option for housing undermined the allocation
of responsible credit decision making.
In addition he reminded us all that the Fed has no remedy for deflation other than crying that the inflation wolf was at the door and we must remain vigilant. Well here we are facing the dis-inflationary demons and there is no wolf in sight.
The FOMC liquidity tsunami flooded the emerging market economies with cash and credit though some of that money did stay here financing a rocket ship for the Dow Jones to ride to the moon.
As soon as the Fed Chair suggested that they were going to tamper with their QE strategy the currency markets went cold shoulder and convertibility rushed to the exits.
Most of the EM countries (Venezuela Argentina South Africa Australia India Turkey Mexico; I could go on) are commodity driven. When things were good during QE 1-2-3 and the prices of their raw materials were high the governments used the bonus money to distribute amongst the leadership expand subsidies for the
poor to curry favor and expand government employment. Now the prices of those same commodities have fallen sharply the governments are trying to cut back on the subsidies.
But the people are not amused.
Investors are heading for the exits at the same time that currency valuations are falling and convertibility is restricted.
- This winters recent Artic Express froze the couch potato consumer in his tracks.
- Retail Sales post the Christmas Holiday shopping Olympics did not stir a viral app.
- Auto sales which lead the nation is consumer participation stalled.
Inventories doubled in selling days excess as the boys in Detroit harked to that old mantra that if we build them they will sell. Unfortunately Ford had a better idea. The bestselling auto will now tough it out in al-u-min-i-um. GM has gone ballistic.
Having learned nothing from the tragic attempt by the Hunt Brothers of Texas to corner the silver market decades ago they have attempted to purchase all the forward shiny bauxite production while they regroup and design a competing product. Such is life in the fast lane. 45 of all US auto sales are U.S. nameplates 25
are imports and the remainders are missionaries: transplants built here but the profits go there.
VW even tried to support a union vote and almost lost the respect of its employees.
Autos are the wave of the past. At one point 1 out of every 25 employees in this nation were either directly or indirectly involved in the production distribution or repair of the automobile. Today the industry is a large contributor to the battery of the un- or under-employed. Tesla may not be the car of the future but its sales network has proven that the days of the retail showroom and big lots of inventory are numbered.
This industry has yet to tune in to the just in time beat. All this is a reminder that what was good for General Bull Moose is not now good for the good ole U.S. of A.
Bringing home the tired poor and wounded adds to the lines of unemployed. Winding down the procurement of military materiel may look good on the budget but it is not good for factory utilization. A smaller Army Navy Air Force & Marines just means less opportunity for those who cannot find their way without the discipline and structure that may have been missing at home.
Dis-inflation will not go away.
And finally the internet is undermining pricing power on the one hand while raising the flags of insurrection on the other. Street demonstrations clog the arteries of commerce.
In the words of the old philosopher: If you dont know where you are going any road will do.
Marc L. Flaster is a founding principal of Sandler ONeill Partners L.P. Flaster has advised financial institutions in balance sheet management for over 35 years.
The views expressed in this article do not necessarily reflect the opinions of any client or organization with which Marc L. Flaster might be affiliated. Readers are advised to complete their own due diligence and analysis prior to taking any strategic actions based upon his interpretations expressed herein.
