It seems to be a policy of the Federal Reserve Board to never use a two-syllable word when a four- or five-syllable word is available.
So we have “quantitative easing” instead of “bond buying,” “tapering” instead of “reducing,” “forward guidance” to describe announcements of future Fed activities, and “macroprudential supervision” for “we have no idea what to do, but we have to say something that sounds important.” 
What may be the most annoying Fed malapropism, though, is the Fed’s use of the word “normalization,” as in the following quote from Fed Chair Janet Yellen after a recent Fed meeting:
“For all of us, the appropriate policy decision is going to be data dependent and all of us will be looking at the incoming data and our opinions about the appropriate timing of normalization are likely to shift as we look at how the data evolves.”
In other words, we’re currently going through a period of abnormalization and the return to “normalization” will begin when the Fed starts raising interest rates. Although, after eight years of zero interest rate policy (ZIRP), shouldn’t we consider ZIRP to be the new normal?
It’s All about Market Volatility
In his Pension Partners blog, Charlie Bilello riffs on this quote and interprets that the Fed’s data dependency is not based on the twin targets of low unemployment and 2% inflation, but is instead dependent on continuing to prop up the stock market.
“It is becoming increasingly obvious,” he writes, “that when they say they are ‘data dependent’ what they really mean is they are ‘S&P 500 and market volatility dependent.’ ”
Propping up the market has become a Fed tradition, he noted, as the Fed used easy money to boost the market even when there was no recession in 1987, 1997, 1998, 2010 and 2011.
So what will the Fed do next? Some are predicting QE4 – a fourth round of quantitative easing. As CNBC noted, “Market chatter about what the Federal Reserve’s next steps will be suddenly has shifted from when it will raise rates to when it will offer more stimulus.”
Those discussing a potential QE4 include Ray Dalio of Bridgewater Associates, manager of the world’s largest hedge fund; Passport Capital’s John Burbank, who predicts the Fed will eventually “be forced into a fourth round of quantitative easing to shore up the economy,” and trend forecaster Gerald Celente, who publishes the Trends Journal. Then there’s Peter Schiff, head of Euro Pacific Capital.
“The Fed is not going to raise rates,” according to Schiff. “They are at zero forever. The Fed is not done with QE, they’re just getting started. The Fed is doing QE4, QE5. This is a never-ending process.”
Apparently, he wasn’t kidding.
Zero Positive Impact
So, why should we care if ZIRP goes on forever?
Because “0% policy is not without costs,” as Bilello wrote, “and is likely impeding long-term economic growth, borrowing from the future to satisfy the whims of today.
“We’re far past the point where emergency easing measures are helping the real economy and I have argued over the past year that it has actually become a headwind as it 1) is a tax on savings and therefore investing, 2) is leading to a gross misallocation of resources and capital, 3) is encouraging financial engineering (buybacks/mergers) over investments in capital/labor, 4) has already created the third financial bubble in the past fifteen years, 5) is putting less money into the hands of consumers, 6) is not helping real wages as asset price inflation (and rents) outpaces income gains, and 7) has only widened the wealth gap.”
Likewise, Burbank told the Financial Times that years of QE has resulted in a worldwide misallocation of capital, while last year’s end of QE in the U.S. triggered a dollar rally with negative consequences.
“The wrong people got the capital — emerging markets countries and corporates and a lot of cyclical companies like mining and energy, particularly shale companies — and this is now a major problem for the credit markets,” according to Burbank.
More QE will not only not help, according to Zerohedge, “it will only make the EM bubble – currently in its pre-bursting phase – even bigger as it promptly crushes the dollar, which just shows how terrified everyone truly is of just biting the bullet and finally undoing years and decades of central bank-driven capital inefficiencies and the biggest global asset bubble in history.”
With no room to take rates lower, markets in near-free fall and worries building over a global recession, Schiff said, another round of easing is the only monetary policy option left. The Fed may take that option – even though it won’t help the economy and will likely do even greater harm.
On the other hand, so many experts predicting that the Fed will initiate more stimulus and delay raising interest rates can mean only one thing – the Fed is about to raise interest rates.