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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 - 19:36 | 2911151 lotsoffun
lotsoffun's picture

the bernake is human, to some degree.  and he clearly has a huge ego.  and the more he gets riffed at blogs and sites and media like these, the less he's concerned about caring about what he must see as 'stupid people' think about him, and the more we insult him, the more he laughs - because he owns the hammer and there is nobody, NOBODY except lloyd and jamie to tell him to stop hammering down on us.  the hammer is coming down guys.  on you and me.

 

Mon, 10/22/2012 - 16:47 | 2910733 blindman
blindman's picture

easing quantity sounds like fun. can
i do it too? can we all play?

Mon, 10/22/2012 - 17:07 | 2910807 hedgehog9999
hedgehog9999's picture

It has been quite obvious that his shit is not working hence the desperate measures.....by the way where is Greenspan, he must be in his cave keeping a low profile ......

Some of the serious money do not want Obama no matter what and as a result we are seeing what we are seeing , it is a battle being fought with heavy money (figure of speech) I meant paper notes.......

Mon, 10/22/2012 - 17:10 | 2910817 Jake88
Jake88's picture

Based on the decrease in rally size with each subsequent announcement of QE this next announcement should precipitate a crash.

Mon, 10/22/2012 - 17:35 | 2910869 hedgehog9999
hedgehog9999's picture

What could precipitate it is a really bad Obummer performance Tonight, he won' have the teleprompter and foreign policy is not particularly his main skill if any.......

Mon, 10/22/2012 - 17:38 | 2910882 luna_man
luna_man's picture

 

 

Can I get a few volunteers?...I'd like to catch the CRIMINAL/MAD MAN, and put his butt in this straitjacket, before the CRIMINAL does any more damage!!!!

 

Just looking for a little help...Do it for the USA!

Mon, 10/22/2012 - 17:40 | 2910888 Antifederalist
Antifederalist's picture

Nobody can see the great and powerful OZ!

Nobody!

How is that working out for you, .... Ben?

Or,

How about a little fire Scarecrow? (Ben)

Mon, 10/22/2012 - 17:58 | 2910940 Piranhanoia
Piranhanoia's picture

Where's Major Kong?    4, 3, 2.......

Mon, 10/22/2012 - 17:58 | 2910941 GOSPLAN HERO
GOSPLAN HERO's picture

MarketWatch is a very lame bulltard cheerleader site.

Mon, 10/22/2012 - 18:45 | 2911046 muppet_master
muppet_master's picture

QEorganizer to casino

"it will be a bigger QE3"

is that why the cranaholic crack ponzi scheme "recovered" today from spx -11 points to +0.5 points??? gee what a "miraculous" TEMPORARY "recovery"...LOL !!!

just give it 2 weeks !!

Mon, 10/22/2012 - 18:46 | 2911048 Orly
Orly's picture

'Til November seventh?

Mon, 10/22/2012 - 20:00 | 2911193 yogibear
yogibear's picture

QE 2, QE 3 didn't work.  So they buy the muni debt. It still doesn't fix the cause. Guess it doesn't matter that the Fed keeps on increasing it's balance sheet. Continued unproductive public spending and socialism grows.

You also have debt saturation for so many people. Unless the debt held by the masses is wiped out as well consumerism doesn't return. 

 

 

Mon, 10/22/2012 - 19:18 | 2911113 alfbell
alfbell's picture

No where to run, no where to hide.

I liquidated all my assets and am all cash now. Doing debt and equity lending for great returns.

Wonder how long I have before TSHTF and I have to transition to tangible, hard assets?

Tricky business.

Gulp!

Mon, 10/22/2012 - 20:04 | 2911202 yogibear
yogibear's picture

When the Fed buys everything and owns everything what's the fed worth when what's on it's balace sheets is garbage or it can't unwind what it has?

 

Mon, 10/22/2012 - 20:21 | 2911240 lindaamick
lindaamick's picture

It used to be that the consumer was the primary engine of debt creation in the US which kept the current system flowing. (for the most part Money is Debt)

Now that the consumer is tapped out and given that the system requires new and larger debt continuously to keep the system flowing, the current program is between the Fed, the Treasury and the Banks. 

This threesome can increase their debt to who-knows-where.  It will work until it doesn't.

A point here is that the current financial system requires bigger and bigger debt.  Some entity has to incur it to keep the game going.  In today's scenario, the consumer doesn't matter.

Mon, 10/22/2012 - 20:42 | 2911287 honestann
honestann's picture

Operation Infinity...
Is planned to last until... infinity.
Gee, no surprise there.  Just bigger BS.

Mon, 10/22/2012 - 21:07 | 2911323 earleflorida
earleflorida's picture

Recently I posted an article about "The Fed's Mission Creep" *[dated Oct.17,2012] by none other than George Will of the WashingtonPost:

excerpt:  "Before the Fed was created 99 years ago (my data check personally @ 1913 & **16th amendment 'Income Tax Act) the U.S. economy was in a recession 48% of the time, since 1913, it has only been in recession 20% of the time. The Fed has done much good.  It cannot however do every good thing; although Congress now seems it should." ***{dual-mandate ie., Humphrey Hawkins Act}

I'll let you be the judge:

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm

note [50 year incremental timeslots] :   1790 - 1849 / 1850 -1899 / 1900 -1949 / 1950 -1999 / 2000 - 2010 / 2011@ $14.8tn / 2012@ $16.4tn ... please take note, that from 1790 - 1863 our debt never got over $100 ml except for 1816/ 1817 &1818 

from 1864 - 1912 our debt never eclipsed $2.8 bn

then from 1913 the Nat'l Debt starts to double every year... beginning in 1913 at $2.9bn and culminating [we've just begun?] in 2012 at $16.4 Trillion!!!

 

2nd)  this graph says it all...visualizing the Long-Term Growth in U.S. GDP per capita *1871 -2009

http://www.visualizingeconomics.com/2011/03/08/long-term-real-growth-in-...

 

3rd) lastly, 'GDP growth 1923 - 2009  *[invert the chart to get the Real Story?]

http://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg

 

Ps. It is relevant to all... that a litany of historical events have had a tremendous cause and effect on our economy. Please take note of all dates, eg. Nixon's Gold Shock, FDR's Social Security Act/ Gold Confiscation #6102, World Wars and others not so ?, Oil Embargo's, Civil War?, The Cold War [USSR] , LBJ's Great society [Medicare & Medicaid via Social Security] and the EU,... etc., etc., etc., and plug them into your thoughts and let-em ferment.

jmo

Ps2.  Finally,... I'd like to say one last thing about 'WAPO's Will'... but, I'll hold my sorrow for such a pitiful tool of the MSM! 

Ps3. Gold as the backing of our monetary system would eliminate the Fed's hapless job of bankrupting our economy and ruining our lives! [tightening and loosening would be easily controlled by the international inflation'deflation of 'GOLD'!

 thankyou tyler  

 

Tue, 10/23/2012 - 04:05 | 2911972 janus
janus's picture

tyler,

this october 23rd, i wanted to give you something special.  i settled on a movie clip to complement your post.  i saw a story similar to the one you reference; i also found it inconceivable.

http://www.youtube.com/watch?v=1-b7RmmMJeo

turns out, i knew nothing when it came to words like "infinity" & "inconceivable". 

look out, bernack; the masked-man is gaining on you.

janus 

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