90 seconds at 9 am: Other than China, PMIs disappoint; new iPhone hot, workers rebel; UST 10yr down to 2.71%; NZ$1 = US$0.838 TWI = 78.0

Stephen,

What does that mean...???    Is it just excess liquidity..??    or maybe part of a Fed strategy to sterilize all of their money printing..????

There was another link on zerohedge I found interesting, with Bill Dudley of the Fed Reserve explaining a few things. Zero hedge describe Dudley as a lunatic, so form your own views. There are a few themes. One is that they have noted commodities have gone up in price faster than other things. PDK will be gratified. 

In contrast, over the past decade, commodity prices generally have been on an upward trend. For example, as shown in Chart 25, fuel prices have generally been in a rising trend since 1999 and non-fuel prices since 2001—both trends interrupted temporarily by the financial crisis.

Dudley argues that this won't feed into regular inflation in the US. I think it's this argument ZH thinks is lunatic. Regardless, it will be an interesting dynamic for small countries like NZ. If this increase is sustained, do we hammer everything else to keep inflation very low, or do we allow for it in some way?

He has a bit on money creation, and the effect of QE, and of pulling it back.

Banks have always had the ability to expand credit whenever they like. They didn't need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal

Reserve's standard operating procedure for several decades has been a

commitment to supply sufficient reserves to keep the fed funds rate at its target. If banks wanted to expand credit that would drive up the demand for reserves, the Fed would automatically meet that demand by supplying additional reserves as needed to maintain the fed funds rate at its target rate. In terms of the ability to expand credit rapidly, it

makes no difference whether the banks have lots of excess reserves on their own balance sheets or can source whatever reserves they need from the fed funds market at the fed funds rate.³

^{Dudley talks then of the will to fight inflation. He says yes, but he is part politician at the end of the day.}

So we have the means to tighten monetary policy when the time comes, but do we have the will? I think there should be no doubt about this. It is well understood among all the members of the FOMC that allowing inflation to gain a foothold is a losing game with large costs and few, if any, benefits. 

^{And a piece I liked where he compared the Fed's role as Central Banker with any concerns over the Fed's gains or losses on their balance sheet.} 

Fed policy is driven by the objectives set out in the dual mandate, and the net income earned by the Fed is the consequence of the policy choices that advance those objectives. The Federal Reserve's net income statement does not drive or constrain our policy actions. In short, we act as a central bank, not an investment manager.

Bill English in particular often seems far more concerned with the RBNZ balance sheet, than its role as central banker. That is a core failing in my view.

Indeed, just need the fossil energy to produce off it....and the water and the weather....

Oh dear, that idea's buggered then.

regards