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Jan Hatzius' Hypothetical Q&A With Ben Bernanke

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Fri, 03/25/2011 - 19:12 | 1101560 TexDenim
TexDenim's picture

There is no way there will be a QE3. Bob McTeer, formerly of the Dallas Fed, said "no new ocean liners" and Dick Fisher, the new Dallas Fed prez. told a German audience he would not have voted for QE2. There will no doubt be some whitewash about "protecting the US balance sheet" but the long booze party is over now. Even if Ben were dumb enough to want to continue mainlining alcohol into the national bloodstream, the new GOP congress will not let him. This bullshit is gonna finally stop.

Fri, 03/25/2011 - 19:19 | 1101574 10kby2k
10kby2k's picture

Tex--thats the reverse psych at work.

Fri, 03/25/2011 - 19:31 | 1101610 Tater Salad
Tater Salad's picture

Tex, couldn't disagree with you more.  QE2 has an 89% correlation with the upward move in equity, the same must hold true (to some degree) if there isn't QE. 

They may "try" to let it expire and see what the hell comes about, however I think the 15-20 handle move south in SPX will change their bulled up stance on things very quickly.  They now have a huge excuse in Japan's recent tradgey.  I can see it now; "we had all intentions of removing QE from our policy however the recent events in Japan now pose a threat to global growth".

 

Say hellow to QE3, locked and loaded. 

Fri, 03/25/2011 - 20:00 | 1101667 TexDenim
TexDenim's picture

Tater, I don't disagree with your analysis of the charts, but how long do you think a government agency can prop up the entire U.S. equity market? Do you recognize that eventually we have to go back to a "free" market?

Fri, 03/25/2011 - 20:19 | 1101708 10kby2k
10kby2k's picture

wtf is a free market?

sarc

Fri, 03/25/2011 - 22:05 | 1101956 RoRoTrader
RoRoTrader's picture

Not long is my best guess and shorting into equities as range tops are now again in sight.

 

Sun, 03/27/2011 - 13:17 | 1105775 malek
malek's picture

Simple answer: As long as inflation doesn't reach the acute pain level for main street. I'd say that's 6 to 24 months in the future.

Tex, we have dropped the "reason" option a long time ago from the policy menu. The return to a free market is only possible through some kind of collapse: either a stock/bond market collapse (real and nominal) or a currency collapse.

Sat, 03/26/2011 - 12:29 | 1103015 InconvenientCou...
InconvenientCounterParty's picture

>>Good morning Ben. You look tired, rough night?

<< That's not fatigue. It's jet lag.

>>So, Ben, Can you sketch out in broad terms how the FED and Treasury will continue to monetize U.S. deficits?

<< For national security reasons, I can't provide any detail. I can say that it will be a concerted effort by the FED, media, wall street and the coporates. In laymen's terms, it's called "the heavy lifting"

>>With the Fed freezing the "market" in short duration bonds, how will the long end respond?

<<In the short term, we may see deformations in different areas of the curve. The committee is quite confident the long end will not become dislocated in any meaningful way. As the recovery plays out, we expect robust demand for all duration U.S. Treasuries will return.

>> Does that mean the S&P won't go up and to the right forever?

<< yes.

Fri, 03/25/2011 - 19:47 | 1101615 Shameful
Shameful's picture

So will the primary dealers still have the hunger for Treasuries if they can't play flip that bond with the Fed?  I'm open to Zimbabwe Ben stopping, I just want to know what entity will step into the market to replace the gorilla level of buying the Fed is doing.  $600 billion is pretty big, even compared to Goldman's bonus pool.   Or is it the premise that the Fed will just let Treasury rates go till they attract a bid.  And will point out problem with higher rates is the insane roll that has to be done over the next 12 months and what additional interest expense will do to the already insane deficits.

Fri, 03/25/2011 - 19:55 | 1101653 AFVet
AFVet's picture

Agreed.  No idea who will be buying Treasuries if/when the Fed stops, which strongly implies some form of QE will continue.  

I also suspect continued easy money was a quid pro quo with Obama in exchange for nominating him again. If Bernanke pulls the punch bowl now, Obama has no shot at a 2nd term, not that he deserves one mind you.

Sat, 03/26/2011 - 04:04 | 1102423 Rikki-Tikki-Tavi
Rikki-Tikki-Tavi's picture

"No idea who will be buying Treasuries if/when the Fed stops, which strongly implies some form of QE will continue."

 

Short term people jumping to safety as equities adjust to "fair value"? More interesting who will buy equities?

Fri, 03/25/2011 - 20:00 | 1101671 TexDenim
TexDenim's picture

Zimbabwe Ben -- I love it. I actually bought a 100 trillion bill from a coin shop in Illinois. Actually I got several of them, along with a matching 1 dollar bill (Zimbabwe brand). I give them away to investment bankers at dinner parties.

Fri, 03/25/2011 - 19:44 | 1101629 Zon
Zon's picture

No way. I remember even zerohedge back in August went back and forth saying QE2 was a sure thing to no chance of QE2 happening. And look what happened.

Fri, 03/25/2011 - 19:15 | 1101568 SolidSnake961
SolidSnake961's picture

dow will crash down if no new QE is announced right away, BTFD time for gold/silver during that time when they go down as well

Fri, 03/25/2011 - 20:56 | 1101802 john39
john39's picture

exactly.  that is the desired effect, and that is why there will be no QE3.  mission accomplished, the economy and the middle class will be thoroughly destroyed and on their knees.

Sat, 03/26/2011 - 07:49 | 1102522 GFORCE
GFORCE's picture

I'm with you there John39. They've accomplisehd their goals. They re-inflated the old bubble to let them diversify their assets.

Now they'll suck out QE and watch it all collapse- probably blame it on Al Qaeda or China. Hello one world currency.

Sat, 03/26/2011 - 23:54 | 1104585 baby_BLYTHE
baby_BLYTHE's picture

The market is almost at the same height it was prior to the "Greatest Collapse since the Great Depression".

If QE is so great, why hasn't the FED attempted this before? Who needs a bear market?

You cannot make this shit up! So Depressing!

Sat, 03/26/2011 - 01:31 | 1102282 LudwigVon
LudwigVon's picture

Exactly. Then QE3 will be here before you know it.

Fri, 03/25/2011 - 19:28 | 1101598 digalert
digalert's picture

Kudlow on CNBS while talking to Pentos referred to ChairSatan as "the Bernank" on todays show. I wonder if he listens to those Panda bears?

Fri, 03/25/2011 - 19:41 | 1101624 JuicyTheAnimal
JuicyTheAnimal's picture

That's some stinky BS not to be trusted for a second. 

Fri, 03/25/2011 - 20:09 | 1101689 Hansel
Hansel's picture

Is this what passes for research at GS?  Jan has a tea party with the Bernank.  What drivel.

Fri, 03/25/2011 - 21:00 | 1101809 Atomizer
Atomizer's picture

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Sat, 03/26/2011 - 02:21 | 1102335 frank
frank's picture

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Sat, 03/26/2011 - 11:30 | 1102854 Atomizer
Atomizer's picture

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Fri, 03/25/2011 - 21:47 | 1101927 Atomizer
Atomizer's picture

You will not last Mr/Mrs junker. We can feel your fear cultivating within your stomach and rectum. Your liberation will be to defect at time of exposure. Funny how history repeats. hehehee

Fri, 03/25/2011 - 22:33 | 1102019 Careless Whisper
Careless Whisper's picture

Q: Mister Hatzius, did anyone from GoldmanSachs take the witness stand today in that criminal insider trading case?

 

Fri, 03/25/2011 - 23:43 | 1102152 max2205
max2205's picture

I hope this is a joke

Fri, 03/25/2011 - 23:58 | 1102172 JW n FL
JW n FL's picture

can you see his hand up his ass? I can barely see his lips move when hes talking as the puppet... fantastic act... 5 stars.. dinner theatre at its best!

Sat, 03/26/2011 - 01:16 | 1102272 Double down
Double down's picture

The gamble is enormous.  The planet needs capacity to absorb the American deficte, and not just the American.  "Accounting changes" can change the degree of freedom of leverage but cannot shrink it.   Are we saying that net new issuance from the EU, US and ASIA will somehow be absorbed without a detrimental increase in rates?  How will leverage capacity grow sufficiently large to absorb the net new issuance when QE2 terminates?  Where will the demand come from to absorb all the "new" assets? 

Where are the Martians who is going to buy this stuff especially now when we have "proved" to American politicians that deficites do not matter?

 

Sat, 03/26/2011 - 08:01 | 1102531 slaughterer
slaughterer's picture

Hatzius for Fed Chairman!  What?  He already is Chairman?

Sat, 03/26/2011 - 08:23 | 1102537 Highrev
Highrev's picture

What's this? A shadow Bernanke system?

What's GS up to with this? A not so subtle attempt to prep Bernanke?

 

Full Disclosure: Keeping in mind it's dealing with hypothetical hypotheticals and coming from GS, and the fact that I don't have unlimited time to waste, I didn't even read it.

Sat, 03/26/2011 - 09:27 | 1102605 Billy Shears
Billy Shears's picture

Can't these statements:

"We believe that the impact of LSAPs works via the stock of securities held by the Federal Reserve, not the flow of purchases....But if it is the stock of purchases that matters, rates will only rise once we announce a reduction in our securities holdings."

be the rational for additional LSAPs and hence the signal that more QEx is in on the way, in due course for whatever reason is conjured?

Sat, 03/26/2011 - 10:09 | 1102629 tom
tom's picture

Hatzius sure acts like he has the inside scoop, but you can't trust him not to lie through his teeth to help Goldman profit by tricking others into believing QE is ending, so I would take him with a grain of salt. But you can't accuse him of being too modest to put words in other people's mouths.

If you think he's being honest this time, and that he's right, then get ready to go triple-short long-dated Treasuries if you can find a way. Especially if there's no taper, the end of QE will bring a sudden spike of net Treasuries issuance in July.

Since QE started, out of the $25 billion per week of debt issued by Treasury, the Fed has been taking about $17 billion for QE and another $7 billion to replace its maturing agencies, leaving just $1b a week of net issuance to the market. Hatzius is saying the Fed will stop QE at the end of June but continue replacing maturing agencies. That would mean net treasury issuance to the market would suddenly jump from $1b a week to about $18b a week in July. I could be wrong, but I don't see China just coming back to the Treasuries market like it was never forced out.

Hatzius' and his Bernanke ventriloquist doll's argument about stocks mattering not flows relates to short-term interbank rates, not Treasuries. Short-term interbank rates depend on stocks of excess reserves. Yields on Treasuries depend very much on the flows of net issuance of Treasuries to the market.

Sat, 03/26/2011 - 13:47 | 1103203 TruthInSunshine
TruthInSunshine's picture

It sounds like Hatzius wrote Bernank a warning letter, on behalf of Goldman Sachs.

But why the publication of it for wide consumption?

Nothing makes sense anymore unless something very dramatic and truly unexpected is about to unfold, and of which a few people have advance knowledge.

Sat, 03/26/2011 - 14:29 | 1103303 rlouis
rlouis's picture

The image that keeps coming to my mind while reading through this is of Darth Vader speaking for the emperor in some scene out of Star Wars.  The voice and breathing of some artificially maintained life form (global reserve currency) that is about to implode on a demented empire.

Giving GS the benefit of the doubt; that the statements attributed to Bernbanks are from Bernbanks testimony to congress and public statements, I am moved by the arrogance of choosing the questions which reporters would deem of sufficient scope and import to ask, and then giving Bernbank's bs reply, followed by the unequivocal GS agreement/opinion on nearly every question.  I would like to ask Bernbanks why destroying the dollar is good for America, the American people and the world < we all have answers for that, but I'd like to hear it from Bernbanks>. 

Lack of Credibility: CPI,  AIG, TBTF, TARP, unregulated derivatives, manipulated markets, multiple quarters of perfect trading at TBTF banks.   ROFLMAO - oh damn, it's funny, cuz if it wasn't, it would be really f**ked up!

Congress should be asking the tough questions, but since they're puppets of their campaign contributors there is no reason to even think of anything off script.   I just hope the reset button doesn't have nukes attached to it. 

 

Sat, 03/26/2011 - 20:12 | 1104022 sbenard
sbenard's picture

I'm so glad Hatzius released this. Now, "Bubbles" Bernanke has sufficient time over the next month to memorize the correct answers to all the questions he's likely to receive. Now that GS has revealed to us what the correct answers are, of course! We wouldn't want to upset Goldman Sachs now, would we?

I couldn't help but notice that GS agrees with ALL of the proposed answers they have spoon-fed to their "Bubbles" stooge. (Now, Bubbles, just follow orders and no one will get hurt.)

Sun, 03/27/2011 - 00:02 | 1104603 TruthInSunshine
TruthInSunshine's picture

Hatzius already sent his 'suggested list of questions' to reporters at Bloomberg, CNBC, The Wall Steet Journal, The Financial Times, The New York Times (hello, Andrew Ross Sorkin) a week ago.

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