Yesterday I sent out an update on the released notes from the meeting the Federal Advisory Council to the Federal Reserve Bank. I also sent out a follow up noting that expectations for a continued rally in real estate may be misguided if the Fed decides to start pulling back its support of the real estate market via its purchases of $45 billion a month of mortgaged backed securities.
The banks advising the Fed are in a position to realize that the economic recovery which is being touted incessantly in the media, is a mirage held up by the easy money Fed policy.
In a further review of their minutes I can across this warning:
"Finally the regressive nature of the artificially compressed savings yields creates pent-up demand within bank deposit portfolios:these deposits may be at risk once yields begin to rise."
It seems pretty clear that the banks are saying that depositor money in their banks may be at risk (think Cyprus).
I have also noted that the Fed has a "No Exit" dilemma in that if it starts tapering its mortgage backed securities purchases it risks crashing the housing market while if it continues it risks an even bigger crash.
There are economists who dismiss this type of analysis but now it seems the large banks that advise the Federal Reserve are saying precisely the same thing.
You can read more at Smaulgld.com
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