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Bernanke Set To Unveil Number Larger Than "Eternity"

Tyler Durden's picture


It was just over a month ago that the Chairsatan formalized the incorrect named QE 3, aka the open-ended QEternity, whose purpose, for now, was to increase the Fed's balance sheet by $40 billion/month in new MBS purchases. Well, according to MarketWatch, whose previously unheard of Greg Robb is seemingly vying for the role of Jon Hilsenrath, Ben Shalom is preparing to unveil a number bigger than eternity: " After historic changes last month, Federal Reserve officials this week will discuss a possible expansion of the size of its third round of bond buying and better ways to guide markets about future policy actions." Just because $40 billion per month in new flow is apparently not enough, and because the market is now well below the level it was when "QE 3" was announced.

Of course, reading the fine-print indicates nothing new, and merely confirms what we said the same day QE3 was announced: "... the central bank will consider whether to expand its bond-buying at the end of the year to take account of Treasury purchases under its Operation Twist plan that finishes at year-end." In other words, instead of ending Twist, which it can't as this is an incremental $45 billion in long-end "flow" added to the market each month, the Fed will merely roll it into an unsterilized program, that will expand the Fed's balance sheet not by $40 but by $85 billion per month. Of course, those who look at the Balance sheet in terms of ten year equivalents, know this all too well already, and know that there is no way that the Fed will halt Twist in just two months without replacing it with an unsterilized program, for the simple reason that the Fed's holdings of sub 3 year debt are on the verge of running out.

From MarketWatch:

There are no pressures on the Fed for immediate action on these two fronts, economists said.


“I think they are reasonably comfortable with the market reaction [to QE3] and the way the economy has turned out,” said Michael Hanson, an economist with Bank of America Merrill Lynch.


Robert DiClemente, chief U.S. economist at Citigroup, noted that, in the wake of QE3, Citi’s financial-conditions index has reached its most accommodative reading since the Fed began easing more than five years ago. “At its current reading, the financial-conditions index is consistent with above-trend growth in final demand, an important prerequisite for stronger hiring and meeting policy goals,” DiClemente wrote in a note.


At the moment, the Fed is buying $45 billion of long-term Treasurys each month under its Operation Twist program, with the purchases offset by sales of shorter-term securities. Many economists think the Fed will decide to expand QE3 by that amount, and with Treasurys instead of MBS. But the announcement is not expected to come until its December meeting.

In other words, nothing new as this is precisely what we explained would happen on September 13. However, it is good to know that with each passing day the Fed is boxing itself ever more into a corner, as there is no way on this earth that Bernanke will be able to unwind a $5 trillion balance sheet (which is what it will be in 2 years), without destroying every last trace of the equity (and likely) other capital markets, unless there is a concurrent bout of hyperinflation.

And here is how the Fed's total assets will hit $5 trillion as Zero Hedge demonstrated before.

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Mon, 10/22/2012 - 15:51 | 2910471 SheepDog-One
SheepDog-One's picture

$40 billion a month is already not big enough? We are totaly fucked.

Mon, 10/22/2012 - 15:55 | 2910485 FoxMulder
FoxMulder's picture

QEternity + 1

Mon, 10/22/2012 - 16:06 | 2910547 max2205
max2205's picture

LoL loudly...fools

Mon, 10/22/2012 - 16:11 | 2910568 TheSilverJournal
TheSilverJournal's picture

All those hoping for a dip in equities and silver will get crushed. The market is about start front running the next addition to QE.

Mon, 10/22/2012 - 16:22 | 2910620 francis_sawyer
francis_sawyer's picture

Print til it hurts bitchez...

Mon, 10/22/2012 - 17:00 | 2910791 ParkAveFlasher
ParkAveFlasher's picture

Gold, bitchez.

Mon, 10/22/2012 - 19:55 | 2911178 Muppet of the U...
Muppet of the Universe's picture

I'd say long nooses and small, throwable rocks, but I'm pretty sure GMOs are going to wipe out the population before then... *facepalm.

Mon, 10/22/2012 - 23:00 | 2911645 goldfish1
goldfish1's picture

Is infininity bigger than eternity?

Mon, 10/22/2012 - 17:01 | 2910793 Jake88
Jake88's picture

it's nothing different than already indicated

Mon, 10/22/2012 - 17:16 | 2910833 TheSilverJournal
TheSilverJournal's picture

Tell that to the balance sheet.

Mon, 10/22/2012 - 16:20 | 2910615 WmMcK
WmMcK's picture

Cardinality increment, bitchez.

Mon, 10/22/2012 - 17:49 | 2910917 Parabolic
Parabolic's picture

QEternity + Infinity

Mon, 10/22/2012 - 19:02 | 2911084 surfersd
surfersd's picture

Romney wins 322 ev to 221 - QEternity in December - Fiscal cliff fixed --- Markets to the Moon!!

Phew, dodged that bullet, 2013 is going to be a partayyy!

Mon, 10/22/2012 - 15:55 | 2910486 Tyler Durden
Tyler Durden's picture

It is not $40 billion a month. It is already $85 billion a month as the matching UST sale of $45/month on the short end is completely meaningless and riskless. Bernanke will merely formalize this on January 1, 2013.

Mon, 10/22/2012 - 15:57 | 2910495 Dr. Richard Head
Dr. Richard Head's picture

Certainly, $85 billion is NOT ENOUGH.  - Paul Krugman

Debt begets debt begets peace, as seen in the EU Nobel Peace Prize. 

Mon, 10/22/2012 - 16:05 | 2910541 El Viejo
El Viejo's picture

so when does the panicked bond selling begin???

Mon, 10/22/2012 - 16:20 | 2910616 Orly
Orly's picture

That's what I'm saying.  Either the memo has already gone out detailing the time and place or these bond boys must have big brass balls.

Mon, 10/22/2012 - 16:47 | 2910735 El Viejo
El Viejo's picture

Bernanke's replacement's replacement's ... will telegraph for months. Relax

Mon, 10/22/2012 - 16:49 | 2910741 LawsofPhysics
LawsofPhysics's picture

What are you talking about Orly?  Most os the 401k sheeple are parked in bonds and most of the rates are not even negative (yet and yes some are).  So plenty of more buying can be done.  Apparently, lots of people want to pay Uncle Sam to lose their retirement. - "Winning"

Mon, 10/22/2012 - 16:56 | 2910775 Orly
Orly's picture

I'm talking about stocks going into the tank and the 10-yr. yield barely budging and even rising slightly today.  Nothing makes any sense any more.

It's either that everyone has their eye on everyone else, waiting like at the OK Corrall for Ike to blink before all hell breaks loose, or somebody knows something somewhere.  The markets seems very much relaxed, don't you think? A little too much so?  Don't you think that's just a bit strange?

Mon, 10/22/2012 - 17:11 | 2910827 derek_vineyard
derek_vineyard's picture

stocks have never tanked here.....they almost did at 666

review the nekkei to see what 'tank' means and what 30yr JGB's yield

Mon, 10/22/2012 - 17:25 | 2910848 Orly
Orly's picture

Okay.  Please allow me try again, calmly and without hyperbole or sarcasm...

For having such a rapid sell-off of equities and each earnings announcement seeming to get worse as the season progresses, doesn't it seem odd to you that global equity markets are as stable as they are and the bond market is completely ignoring it and is, in fact, trading anathema to what would be considered a "normal" pattern?

I know things haven't been "normal" for quite some time.  What I mean to say is that the markets are more abnormal than we have seen previously.

What it means to me is that there could very well be a major announcement at the close of Wednsday's Fed meeting in which the Fed announces a massive program of asset purchases, which are more than likely to not fit under the previously understood purview of the Federal Reserve.

Like when you're out in the woods and things are just too quiet...

Mon, 10/22/2012 - 18:35 | 2910986 poor fella
poor fella's picture

something's up

People don't affect the markets - the 'markets' have become numbers and people react TO them. Even if that's not entirely true - the forces that move markets have become increasingly more influential to the point that it must be hidden (i.e. Goldman's special software that could manipulate markets in the wrong hands).

At the highest level, since 'debt' is all that matters, there isn't a whole hell of a lot to watch. As long as speculation, consumerism, war, income disparity, and 'keeping up with the Joneses'" remains Global Policy - things are looking quite well. That's one of the many reasons a bad job market is great. Low wage pressures along with the limited possibility of Main Street to pay down debt (moving against the Fed) in a substantial way due to insecurities and necessity to save (or help family and friends - ALL consuption positive).

It's interesting that fascism surrounds our lives but I haven't seen the Fascist Party on any of the polls. Might be good to join early. Turn in your neighbors before they turn you in... and all that.

Mon, 10/22/2012 - 18:34 | 2911029 Orly
Orly's picture

Well, suppose we're on a time-warp hunting trip and we're tracking a load of sauropods through the swamps of Iowa back in the day.  You've seen the tracks of the T-Rex the past couple of days, so you're a little edgy.

In a clearing, you can hear maybe twelve of them- big mammas- surrounding the herd, all hissing and squealing, trying to frighten them into a tighter circle; to wait for the attack and separate a fat one from the rest.  Except with all the hiss and thunder, no one moves.  They keep on eating grass and drinking the water from a river delta, nuzzling up to each other.

You hear it and are scared out of your freaking mind but not one of the Apatosaurs reacts in any way, shape or form.

That kinda weird.  That's what I'm talking about.

Freaky kinda weird.

Mon, 10/22/2012 - 20:03 | 2911201 poor fella
poor fella's picture

At least that would be natural, in a cull-the-weak, slow, old, fat, etc. sorta way.

We went through the 'new technology' phase in financials.

Similar to:

old growth forrest  --->  meet steam engine and saw (now the old trees worth naming fit on one page)

shark ---> meet shark-finner (millions of dead fish for nothing)

buffalo ---> meet Bill (Oh, sorry, guess there weren't unlimited buffalo)

tuna ---> meet satellites and factory ship (million dollar tuna coming soon as they approach extinction)

business ---> meet private equity 'harvester' (Too much capital JUST SITTING THERE, should be in my POCKET!)

ma-n-pa pension ---> meet hedge fund manager (who cares, it's covered by govt sponsored pension insurance)


Those first to the party made all the money.. Now the wannabe's, once they saw how it was done, are standing around waiting for sloppy seconds. Too bad it would take decades of productivity and healthy economies to rebuild the surplus that was wrested away with the help of the government/private revolving door.

This is the 'weird quiet' Bernanke hears when he goes home and sits in silence. Completely expecting things to blow the F'ING hell up, and surprised that he goes to work each morning. Does he hear the voices of crowds in the night and relieved it's only the t.v. downstairs and not an actual riot?

THAT kinda weird!!!?


Mon, 10/22/2012 - 17:27 | 2910853 TheSilverJournal
TheSilverJournal's picture

The US situation isn't comparable. The Japanese had a huge export economy with a ginormous savings rate, whereas the US is hugely dependant on imports.. and savings?...what does save mean?

Tue, 10/23/2012 - 12:20 | 2913013 A is A
A is A's picture

This is a thing of the past. Japan's savings rate is basically 0 now and they just reported a huge trade deficit for Sept. They are screwed just like the rest of us.

Mon, 10/22/2012 - 15:58 | 2910501 SheepDog-One
SheepDog-One's picture

Yep, no doubt.

Mon, 10/22/2012 - 16:04 | 2910532 FL_Conservative
FL_Conservative's picture

If you ask me, it looks like we're back to the same old verbal masterbation.

Mon, 10/22/2012 - 16:07 | 2910544 GolfHatesMe
GolfHatesMe's picture

Once you have had $100 Billion per month you can't go back. 

Mon, 10/22/2012 - 16:30 | 2910648 machineh
machineh's picture

That's enough Krugmanrands to fill the Grand Canyon.

Mon, 10/22/2012 - 16:06 | 2910545 LawsofPhysics
LawsofPhysics's picture

Correct, now where can I exchange these FRNs for SDRs?  certainly those will be as good as gold. < sarc off >

Tue, 10/23/2012 - 07:21 | 2912066 Anasteus
Anasteus's picture

I would like to figure out how the heck is then possible that gold is falling so rapidly. I do not tend to attribute it wholly to JPM.

Mon, 10/22/2012 - 15:57 | 2910494 Calvinvtw
Calvinvtw's picture

I make $82h while I'm traveling the world. Last week I worked by my laptop in Rome, Monti Carlo and finally Paris…This week I'm back in the USA. All I do are easy tasks from this one cool site. check it out, www.Zoo33.com

Mon, 10/22/2012 - 15:57 | 2910498 Dr. Richard Head
Dr. Richard Head's picture


You know, you can just masturbate on a webcam in your bedroom and not have to travel the world.

Mon, 10/22/2012 - 16:32 | 2910657 machineh
machineh's picture

Yeah, he should be ashamed of pimping out his mom (she's a virgin).

Mon, 10/22/2012 - 17:06 | 2910801 francis_sawyer
francis_sawyer's picture

Simon Black ~ Is that you?... How's PANDORA treating you?...

Mon, 10/22/2012 - 16:02 | 2910527 e-man
e-man's picture

Come back on this site when you're making $85 B an hour.  In the meantime, here's a site you can post on, where robot readers will be interested in your $82/h: http://www.cnn.com

Mon, 10/22/2012 - 19:03 | 2911086 Tommy Gunner
Tommy Gunner's picture

Better to post on CNBC.com - where all the muppets are

Mon, 10/22/2012 - 20:13 | 2911227 DosZap
DosZap's picture

I make $82h while I'm traveling the world. Last week I worked by my laptop in Rome, Monti Carlo and finally Paris…This week I'm back in the USA. All I do are easy tasks from this one cool site. check it out, www.Zoo33.com


Simon?, is that you?.

Mon, 10/22/2012 - 16:05 | 2910542 resurger
resurger's picture

big fucking time

Mon, 10/22/2012 - 16:07 | 2910543 jomama
jomama's picture

40b.  that's only $4.23 a person a day for everyone in the US.

no big deal, right?

Mon, 10/22/2012 - 17:45 | 2910909 CPL
CPL's picture

For only dollars a day you can take care of a starving american and make sure they get the nutrition they need.


Oh Sally Struthers where are you to eat cake and market this tragedy.

Mon, 10/22/2012 - 18:13 | 2910973 HurricaneSeason
HurricaneSeason's picture

It's no big deal because we borrow $1.5 trillion in new debt each year and the interest on the national debt is only a few hundred billion a year. Clear sailing for the next 10 years if interest rates don't go up.

Mon, 10/22/2012 - 18:42 | 2911044 lolmao500
lolmao500's picture

And when it does, kaboom overnight.

Mon, 10/22/2012 - 19:34 | 2911141 Mentaliusanything
Mentaliusanything's picture

Not at all, you can just print your interest payments. Your creditors will love the smell of New money.

When it ends I want to be sitting in front of (but not to close to) Bernanke as he pukes up his guts.

Then I'll offer him a loaded revolver. Its the humane thing to do.

Mon, 10/22/2012 - 17:29 | 2910856 q99x2
q99x2's picture

The FED is totally fucked. I'm good.

Mon, 10/22/2012 - 18:42 | 2911041 lolmao500
lolmao500's picture

Well no, the US runs $100 billion deficits per month...

Mon, 10/22/2012 - 19:39 | 2911155 omniversling
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