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FOMC Minutes Show Fed Members Expect More Unsterilized Monetization After Twist Ends, As Expected

Tyler Durden's picture


In what should be news to precisely nobody (especially our readers, for whom we laid out the next Easing steps very clearly on the day QEternity was announced, including the continuation of Twist after December 31, 2012 at which point the Fed would merely monetize long-dated paper without selling short-end, i.e. unsterilized), the just released FOMC minutes indicated that "a number" of FOMC members favored more (infiniter) QE after the end of Twist. In other words, the Fed will have to continue monetizing the long-end of the Treasury issuance in lieu of other willing buyers. Recall that the Fed is currently buying up all the 10 Year+ gross issuance. To assume that this can change in some way is ludicrous. It also means that going forward, anything less than $85 billion in monthly flow from the Fed will be seen as tightening. Apparently, this update was big news to the algos (and the BIS FX traders) in charge of daytrading the EURUSD, which ramped by 30 pips on the news. Stocks, however, are oddly enough, the rational instrument today, and have barely budged on this news, once again indicating (as shown during yesterday's Yellen comments), that the Fed has priced itself and its future decisions out of the market, also exactly as we predicted would happen minutes after QEternity was announced.

For those who still don't get it, here it is in under 140 characters, from long ago: 


From the minutes:

Looking ahead, a number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension program in order to achieve a substantial improvement in the labor market. In that regard, a couple of participants noted the likely usefulness of clarifying the range of indicators that would be evaluated in assessing the outlook for the labor market. Participants generally agreed that in determining the appropriate size, pace, and composition of  further purchases, they would need to carefully assess the efficacy of asset purchases in fostering stronger economic activity and consider the potential  risks and costs of such purchases. 

There were some rational voices...

Several participants questioned the effectiveness of the current purchases or whether a continuation of them would be warranted if the recent moderate pace of economic recovery were sustained. In addition, several participants expressed  concerns that sizable asset purchases might eventually have adverse consequences for the functioning of asset markets or that they might complicate the Committee’s ability to remove policy accommodation at the appropriatetime and normalize the size and composition of the Federal Reserve’s balance sheet. A couple of participants noted that an extended period of policy accommodation posed an upside risk to inflation.

But fear not, they were promptly drowned out.

As for those still confused, this is how the Fed's balance sheet will look over the next 2 years:

Full report (link)


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Wed, 11/14/2012 - 15:20 | 2980961 youngman
youngman's picture

Gold dribbled...and then dropped...to funny....oh well..the Chinese will buy it all anyway

Wed, 11/14/2012 - 15:21 | 2980969 Michaelwiseguy
Michaelwiseguy's picture

"I will steal the majority of peoples money, wealth, and ability to prosper by owning the money supply and making the monetary rules myself." - Dr. Evil

Wed, 11/14/2012 - 15:28 | 2981007 Sweet Chicken
Sweet Chicken's picture

Wow that Athens picture is rad. 

Wed, 11/14/2012 - 21:17 | 2982401 max2205
max2205's picture

They must have meet and wrote this while in Colorado after weed became legal


Wed, 11/14/2012 - 15:36 | 2981040 ziggy59
Wed, 11/14/2012 - 16:16 | 2981250 fuu
fuu's picture

The Athens pic is from September...

Wed, 11/14/2012 - 16:28 | 2981309 walküre
walküre's picture

Add inflation for anything you need in order to keep alive.

Wed, 11/14/2012 - 15:28 | 2981004 Antifederalist
Antifederalist's picture

But Dr. Evil, that has already happened.......

"work with me people, i have been asleep for 30 years."

Wed, 11/14/2012 - 15:43 | 2981056 Michaelwiseguy
Michaelwiseguy's picture

You don't say. Can you give me the name of the person doing this today? Throw me a freakin bone here.

Wed, 11/14/2012 - 15:20 | 2980963 Kaiser Sousa
Kaiser Sousa's picture

and add to this the obligatory attempt to smack down Gold and Silver at the Crimex close......



Wed, 11/14/2012 - 15:21 | 2980965 bania
bania's picture

sums up how i'm feeling...


Wed, 11/14/2012 - 15:23 | 2980966 SemperFord
SemperFord's picture

"As for those still confused, this is how the Fed's balance sheet will look over the next 2 years:"


As will unemployment, cost of living, etc...sucks.

Wed, 11/14/2012 - 15:21 | 2980968 JustObserving
JustObserving's picture

So why are gold and silver not going parabolic on that news?

Wed, 11/14/2012 - 15:24 | 2980984 Dr. Richard Head
Dr. Richard Head's picture

Naked short sale of silver futures by primary dealers that have an unlimited flow of funds coming for the digital Benny press.

Wed, 11/14/2012 - 15:51 | 2981120 Beam Me Up Scotty
Beam Me Up Scotty's picture

Keep the prices suppressed.  In fact please knock silver down to $25 an ounce or even $20?  Please Blythe?

Wed, 11/14/2012 - 15:22 | 2980972 Slope of Hope
Slope of Hope's picture

Gold should be rocking, but the algos really hate GDX today!

Wed, 11/14/2012 - 16:17 | 2981257 VonManstein
VonManstein's picture

i dont buy GDX or HUI. Look what Barrick did to HUI the other day. Gold/silver miners are to be researched and picked. Listen to Rick Rule, he knows.

Wed, 11/14/2012 - 15:22 | 2980977 swissaustrian
swissaustrian's picture

So why is the market selling off?

Is it because Ron Paul is giving his farewell speech right now?

Direct link to the video of the House session

Here is his first farewell speech from 1984:

Wed, 11/14/2012 - 16:23 | 2981290 Urban Redneck
Urban Redneck's picture

barry on the boob tube

Wed, 11/14/2012 - 15:23 | 2980981 fonzannoon
fonzannoon's picture

"Several participants questioned the effectiveness of the current purchases or whether a continuation of them would be warranted if the recent moderate pace of economic recovery were sustained"

No offense but that is the complete opposite of rational thought. "so if we can keep this big fkin lie going and keep bullshitting everyone with schizophrenic data we may not need to buy everything in sight"

Wed, 11/14/2012 - 15:54 | 2981141 Beam Me Up Scotty
Beam Me Up Scotty's picture

I read that sentence too and thought the same thing.  There is only the illusion of a moderate pace of economic recovery because of your monetization.  You stop, the market falls.  There is no "sustained".  In fact like Tyler said, anything less than $85bil a month is going to be seen as tightening. 

Wed, 11/14/2012 - 15:25 | 2980985 fuu
fuu's picture

$85,000,000,000/mo = $32,793.21/second.

Every second Ben is going to print what used to be a decent living.

Wed, 11/14/2012 - 15:43 | 2981078 SheepDog-One
SheepDog-One's picture

$33,000 per second....just to keep the wheels from totaly flying off....fucking terrifying.

Wed, 11/14/2012 - 15:50 | 2981117 fonzannoon
fonzannoon's picture

Must be awesome to be a TBTF and see 33k update as a deposit in your account every single second....

Wed, 11/14/2012 - 15:56 | 2981147 fuu
fuu's picture

The scale is awesome.

Wed, 11/14/2012 - 19:46 | 2982040 fuu
fuu's picture

At the $85B/mo rate Ben will have monetized $393,518,518.52 since I posted 12,000 seconds ago.


That's $1.31 per American.

Wed, 11/14/2012 - 15:25 | 2980990 Cognitive Dissonance
Cognitive Dissonance's picture

So that's why "someone" keeps sitting on Gold and Silver today after each breakout higher.

Wed, 11/14/2012 - 16:11 | 2981230 you enjoy myself
you enjoy myself's picture

yeah, but owning gold and silver now must feel like being short to the gills on housing in 2006.  the timing is just a bit off, but the end result is a known certainty - any short term pain is just that, short term.  it will soon be Fed policy to continuously print $1T a year - that they're scared shitless to *only* print $500B is all you need to know.  there's only one possible ending.  

Wed, 11/14/2012 - 15:24 | 2980992 disabledvet
disabledvet's picture

Laid out incorrectly of course (since there is no recovery thesis at ZH.) The purpose of the QE is NOT to provide "equity ramps" Tylers Durden but to FUND THE WAR EFFORT. That makes final demand a "Presidential prerogative" in my book. Hitler ended unemployment and inflation in Germany within a few short years...and the German people never forgot that. Obama can do the same folks! What he can't do is grow the economy (in my view.) Only the banks can do that...through CREDIT CREATION. He would have to give up QE in exchange for something. Hmmmmm. I wonder what?

Wed, 11/14/2012 - 15:30 | 2981013 tickhound
tickhound's picture

look out bitchez... might not be long before we see some serious-fuel-injected-pump.  Next thing you know they'll be selling us on 1000% inflation.................

Wed, 11/14/2012 - 15:33 | 2981019 ziggy59
ziggy59's picture

On a long enough Fed timeline, the survival rate, and worth, of the dollar goes to zero

Wed, 11/14/2012 - 15:32 | 2981024 buzzsaw99
buzzsaw99's picture

Those joos care sooo much about the labor market it brings a tear to my eye. [/sarc.]

Wed, 11/14/2012 - 15:34 | 2981033 fonzannoon
fonzannoon's picture

1,000 points off the dow in a week and the Vix has sharted at best. Makes sense....

Wed, 11/14/2012 - 15:45 | 2981090 SheepDog-One
SheepDog-One's picture

FED has destroyed all the guages, its just on autopilot now and It seems theyre all parachuting out the back as we speak.

Wed, 11/14/2012 - 16:02 | 2981177 catacl1sm
catacl1sm's picture

I liked it better when they jumped off of buildings without parachutes.

Wed, 11/14/2012 - 16:04 | 2981192 Antifederalist
Antifederalist's picture


Wed, 11/14/2012 - 16:00 | 2981164 Milton Waddams
Milton Waddams's picture

Mostly because the algorithms have successfully 'walked' the market lower.  There have only been a few outsized declines / daily ranges since the local high... compared to, say, the summer of 2011, or even earlier this year.

Wed, 11/14/2012 - 15:37 | 2981047 eclectic syncretist
eclectic syncretist's picture

What's the big deal, it's just punching in some agreed upon numbers in the Fed's computers, that's all.

Wed, 11/14/2012 - 15:38 | 2981053 earnulf
earnulf's picture

So at just short of 3 Trillion on the balance sheet, how much of that is Treasury Debt Issuance?    Just curious as to how far back the Chinese and Japanese are now.

Wed, 11/14/2012 - 15:39 | 2981058 tooriskytoinvest
tooriskytoinvest's picture


http://investmentwatchblog.com/peter-morici-a-second-great-depression-would-grip-the-nation/ Taxmageddon: Holding Hands while Jumping Off the Cliff http://www.batr.org/negotium/111412.html


Wed, 11/14/2012 - 15:47 | 2981102 Bicycles and Beer
Bicycles and Beer's picture

the fed is a barbaric relic.

Wed, 11/14/2012 - 15:49 | 2981111 fonzannoon
fonzannoon's picture

So for the second day in a row the fed has announced QE and stocks grabbed the fed in a headlock and farted in it's face. Precious metals are just simmering while china makes it clear they are buying with both hands. When do we start the countdown to parabolic takeoff?

Wed, 11/14/2012 - 15:59 | 2981142 Antifederalist
Antifederalist's picture

Yep, the FED is going to have to up their game.  If a determined FED can always prevent deflation we are about to see how determined they can become............

Hey Ben, maybe you waited a bit too long on that "wring out inflation" strategy.  Now what have you got?



Wed, 11/14/2012 - 16:39 | 2981385 WaEver
WaEver's picture

Time to sterilze the fed

Wed, 11/14/2012 - 18:02 | 2981762 W10321303
W10321303's picture

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City

My name is Bill Black, and I have dedicated my career to the study and prosecution of massive control frauds. As such, I have come into contact with many of the policymakers and thinkers criticized here on Naked Capitalism. And I can tell you that if you want to change the corroded thinking in the high halls of power, you should join those of us who have given to Naked Capitalism this year.

One of the testaments to the strength of this blog is that people who detest heterodox critiques of neo-liberal dogma feel they need to read Naked Capitalism in order to understand their opponents’ positions. Yves is an expert whose passion for trying to fix the things that are so profoundly screwed up in our financial system matches her hard work. Good blogs take an enormous amount of work and dedication to high standards.

Thu, 11/15/2012 - 07:10 | 2983378 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

PAYPAL?  FUCK THAT.  I'd send some bitcoin anonymously if they'd take it, though.

Thu, 11/15/2012 - 04:00 | 2983267 Parrotile
Parrotile's picture

Seeing as ever more QE will lead to ever more dollar devaluation, maybe this'll be a nice reminder of what can happen when the banks are bailed out -


And, not to let the Eurozone feel left out -


After all, FIAT currency is really "just paper" anyhow, and we may as well get some "comfort" out of it, on the journey to hyperinflation!

Do NOT follow this link or you will be banned from the site!