The Fed determined that labor demand was increasing but not enough to stave off high levels of unemployment. Industrial production increased, as did consumer spending, but the housing market remained a tremendous threat to prosperity. Stock prices rose, an outcome the Fed would deem as desirable, as the wealth effect of low interest rates is a key justification for monetary stimulus. The inflation that the Fed seeks remains elusive:

The underlying rate of consumer price inflation in recent months was lower than the staff expected at the time of the November meeting, and the staff forecast anticipated that core PCE prices would rise a bit more slowly in 2011 and 2012 than previously projected. As in earlier forecasts, the persistent wide margin of economic slack in the projection was expected to sustain downward pressure on inflation, but the ongoing stability in inflation expectations was anticipated to stem further disinflation. The staff anticipated that relatively rapid increases in energy prices would raise total consumer price inflation above the core rate in the near term, but that this upward pressure would dissipate by 2012.

[...]

Regarding their overall outlook for economic activity, participants generally agreed that, even with the positive news received over the intermeeting period, the most likely outcome was a gradual pickup in growth with slow progress toward maximum employment. [...] Regarding the outlook for inflation, participants generally anticipated that inflation would remain for some time below levels judged to be most consistent, over the longer run, with maximum employment and price stability.

It doesn't appear for the moment that the Fed's controversial policy of buying long-term Treasury and other securities is on pace to moderate, let alone reverse. Somewhere, David Einhorn is  expressing moderate frustration at this.

mtaylor [at] observer.com | @mbrookstyalor

Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

As such, the creation of additional money to buy Treasuries will continue at a rate of about $75 billion a month. The target interest rate will remain between 0 and 0.25 percent. All the Federal Open Market Committee members voted in favor of the policy, with the exception of super inflation hawk and perennial dissenter Thomas M. Hoenig.

mtaylor [at] observer.com | @mbrookstaylor

• The government bailout of financial institutions is wildly unpopular and perceived to be highly wasteful. Which is funny, the Treasury Department reckons, because so far it has yielded a profit of $35 billion. [AP]
• Americans want drastic action taken against the deficit; they just don't want to pay more taxes or reduce spending on the military, entitlements or farm subsidies, according to a poll. They'd rather soak the rich. [Bloomberg]
• Self-employment has been on the decline since the recession ended. Where is America's can-do spirit? [NYT]
• Since Fed Chairman Ben Bernanke took the widely questioned step to embark on a $600 billion round of quantitative easing, long-term interest rates have gone up. That's bad, because the point of quantitative easing was to lower interest rates. [WSJ]
• Senator Carl Levin says that in 2007 Goldman Sachs was manipulating the prices of credit default swaps. He is also in possession of some emails that make one Goldman senior trader look like kind of a jerk. [FT]

mtaylor [at] observer.com | @mbrookstaylor

That might explain the number of uncomfortable silences at today's conference on Capital Markets in Real Estate, hosted by N.Y.U.'s Schack Institute of Real Estate at the Waldorf Astoria. No one wants to get in a fight with Ben Bernanke. Except when they do. 

"I don't think it's an attack on the foundations of Western civilization," said Mr. Holtz-Eakin, who was the speaker for the morning's fourth session, and at least the third in which printing more money came up. "But I think it's a very, very bad idea." 

It can't be the bagels (cold) or the tours of the hotel (charming) that drew a (mostly male) crowd of  industry heavyweights and N.Y.U. grad students out at 8 this Thursday morning. It must be a palpable fear that the shake-up in capital markets isn't over.

Some believe it's only just begun.  

Inflation is generally good for the real estate business, Mr. Holtz-Eakin conceded. But economic instability, of course, is not. He expects at least a couple of years of volatility while everyone tries to figure out the structure of returns on investments.

Otherwise, Mr. Holtz-Eakin barely mentioned real estate, much like the event's keynote speaker, Michelle Caruso-Cabrera, a CNBC anchor who's just come out with a book, You Know I'm Right: More Prosperity, Less Government. But the dire economic future both speakers anticipate in the next couple of years, if indeed it comes true, will no doubt affect the property market's nascent recovery. 

Ms. Caruso-Cabrera said quantitative easing is one of the most important economic issues of the moment, but she declined to tell The Observer whether she thinks it's a good idea. She did offer this real estate-related tidbit, courtesy of her speaker's notes (paraphrased):

Following the French Revolution, the new republican government printed money whose value was tied to church land they'd acquired. But they kept discovering that the land was worth more, so they kept printing more money and devaluing the existing currency. In seven years, the price of a bushel of flour went from 40 cents to $40.

Let the Fed eat cake!

The journalist emphasized she wasn't saying that printing money is bad--or, god forbid, will cause a revolution--but just that it has important consequences. 

The Fed did have one defender on the mid-morning Private Equity Panel--which mostly tried to steer clear of politics and talk about all the bargain investment opportunities in places like New York and Washington, as well as more recently in California, that are going, going ... almost gone.

Neil Bluhm, of Walton Street Capital, said the controversy has been "blown out of proportion." He added: “I’ve been beat up by a lot of friends because I supported Obama. But he saved this country from going into the greatest depression of all time.” 

lkusisto@observer.com 

• President Obama and his administration puckered up to give corporate America a big wet kiss yesterday, but corporate America turned away at the last second and said, "I'm not that kind of girl. Plus, I heard what you've been saying about me behind my back." [WSJ]
• A settlement is in the works between major banks and state attorneys general over the matter of shoddy foreclosure paperwork. [CNBC]
• General Motors' initial public offering, expected to be priced today, will be one of the largest in American history. It will also look like a major breakthrough for bailed-out corporate America, but looks can be deceiving. [NYT]
• The National Academy of Engineering and National Research Council has found that BP ignored some risks and was not very disciplined when it came to keeping the Gulf of Mexico from becoming an ecological disaster zone. [Bloomberg]
• Republicans, irritated by the Federal Reserve's quantitative easing regime, would prefer that the central bank concern itself only with controlling inflation and let other people handle the whole unemployment thing. [FT]

mtaylor [at] observer.com | @mbrookstaylor

• National Economic Council head Larry Summers, whom we'd forgotten about since he announced in September he'd be leaving the White House, said getting along with China would be crucial to America's economic recovery. [WSJ]
• The Congressional Oversight Panel has an idea for what to do about the foreclosure crisis: Stress tests! [CNNMoney]
• The Federal Reserve is pouring $600 billion in monetary stimulus on the economy -- economists, foreign officials and politicians be damned. [NYT]
• In fact, New York Federal Reserve head William Dudley, who's normally press-shy, gave an interview about quantitative easing. [CNBC]
• Investors are so stoked to get a piece of majority government-owned automaker General Motors that the company is raising the price on tomorrow's initial public offering. [Bloomberg]

mtaylor [at] observer. com | @mbrookstaylor

"We subscribe to your statement in the Washington Post on November 4 that 'the Federal Reserve cannot solve all the economy's problems on its own,'" wrote this collective of monetary dissidents in today's Wall Street Journal.

See what they did there? They took what Bernanke said and flipped it on him! They're clever rhetoricians, but how many of them have worn Bernanke's heavy crown? How many of them have had a finger on the monetary trigger? To evaluate, The Observer has assembled a look at the Illustrious Enemies of the Fed's New Stimulus Plan.

Last Wednesday, the Fed announced that it would be buying around $600 billion in Treasury securities over the next eight months. The central bank has promised to buy $105 billion over the course of this month.

The unconventional monetary practice, which endeavors to lower interest rates and encourage investment, has been criticized by Sarah Palin, Alan Greenspan, Germany, Brazil, Nassim Taleb and others as a currency-debasing way of creating asset bubbles. As sharp as their criticism has been, they have to admit that now there literally is more money to go around.

mtaylor [at] observer.com | @mbrookstaylor

Quantitative easing, quantitative easing, quantitative easing! It's a mantra, it's a magic spell, it rolls off the tongue like a rhythmic incantation. It's all that, plus 219 points worth of upside for your friendly, neighborhood Dow Jones Industrial Average. Is it getting hot in here, or is it just that I AM ON FIRE?!

My closing point value for today, 11434.84, is the highest I've been since Lehman Brothers cratered in the biggest bankruptcy in American history. It's like it never happened! (Okay, that's not totally correct, but I am feeling as good as I've felt since the horror show of 2008.)

Some people thought that I'd priced in the $600 billion in monetary stimulus from the Federal Reserve, but they were wrong! Ben Bernanke can still goose me. Ignore the naysayers.

Despite whatever foreclosure problems have sprouted up in the past few months, Bank of America and JPMorgan Chase were my biggest winners, each climbing more than 5 percent! Give me a Q! Give me an E! Give me a 2! What's that spell? Money! Go, banks, go! Go, Bernanke, go! Quantitative easing, quantitative easing, quantitative easing!

Can't wait to get going again tomorrow,

The Dow Jones Industrial Average