What $1.4 Trillion In QE Buys The US Economy

Tyler Durden's picture

Back in December of 2012, the Fed, after two and a half failed attempts to stimulate the economy (via QE1, QE2 and Operation Twist), announced Open-Ended QE of an indefinite injection of $85 billion per month (which it currently is tapering at a pace of $10 billion per month on the realization that it has soaked up virtually all high quality collateral). Since then the Fed's balance sheet has grown from $2.9 trillion to $4.3 trillion: a direct injection of $1.4 trillion in liquidity into the stock market, if not so much the economy, which as Wall Street is suddenly busy telling us following the latest disappointing construction spending data (the same Wall Street which initially expected Q1 GDP to be 2.75%), probably contracted for the first time in three years!

There's even better news: if the next quarter shows the US economy contracting again - and with the "beneficial" impact of Obamacare fading, global trade stuck in the doldrums, and US consumers tapped out with near record low savings this is a distinct possibility - the US will officially enter a recession.

And this ignores the terrifying possibility of even more rain in the spring, not to mention the mortal threat of El Nino in the summer. Then the US is virtually assured an all out collapse into depression.

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Max Damage's picture

Dont worry


440 years for doing far less than the NSA does to everyone else

spine001's picture

Article forgets the direct impact of QE3 on GDP. Without that impact we would have been in an official GDP contraction for a long time, since we are in contraction mode right now. Only not officially. QE reached its limits long time ago.

As I have been saying since 2008,  it can be mathematically predicted using nonlinear dynamic modeling tha the economy is a chaotic system and that doing QE adI nfinitum you only increase the likelihood of betting the system out of its current stable attractor boundaries. And pushing it to a new attractor but with NO control of the new attractor the system will end up at. I hope that the morons at the FED finally understood the math.

Since a possible new attractor is going back to the stone age, and the way thezse systems work you cant't possiblty control the transition once you get outside of the stable boundary of the system. I hope ghat Putin understands this too.

NoDebt's picture

You should, like, send them a memo or something about that.

Obchelli's picture

And tomorrow Job number will show up great with fantastic revisions to last two month numbers and market will go on with Rally to New All time Highs.

I'm amazed how masterfuly they blend numbers stimulus and lies to keep this market going up for so long...


Have to give them credit for manipulation - it's like they naver make any mistake running on a razor blade...

svayambhu108's picture

They are supposed to give an example, Salinas should live as long as Noah and teach them a lesson.

Angry Plant's picture

Yea those 500k+ new jobs added in the three months of the first quarter seems rather odd when economy didn't grow at all?

drendebe10's picture

Insanity: doing the same thing over and over again and expecting different results.

Albert Einstein

Read more at http://www.brainyquote.com/quotes/quotes/a/alberteins133991.html#He3VFSdZGWOu3HuB.99

Insanity: doing the same thing over and over again and expecting different results.

Albert Einstein

Read more at http://www.brainyquote.com/quotes/quotes/a/alberteins133991.html#He3VFSdZGWOu3HuB.99

"insanity:  Doing the same over and over again and expecting different results."  Albert Einstein.

maskone909's picture

enter a recession?  no problem!  we will just change all the metrics to reflect 1% GDP growth.  then its back to weather and other important hard hitting issues.

NoDebt's picture

Agreed.  None of us will live long enough to see the next officially declared recession.

When numbers on the screen are what matters, the numbers will be changed as necessary to fit the narrative.

Caviar Emptor's picture

The Ministry of Optimal Economics announces the official end to all future recessions

Xibalba's picture

Don't worry!  Mary Jo White is on your side

williambanzai7's picture

Secret FOMC emergency meeting?

QQQBall's picture

Zactly - play the party line of modest taper while juicing everything in sight.

buzzsaw99's picture

no-one expects the spanish, er, stealth qe

Grande Tetons's picture

Look at the 10yr, baby! Well bid. 

Pull up a long term chart and focus in on the fall of 08. This puppy could really drop. 

maskone909's picture

couldnt negative real interest rates push banks into hyperinflating the currency?  if banks et al start losing $$ for holding treasuries

fonzannoon's picture

Every treasury short is getting stopped out today....just in time for tomorrow's celebration.

Grande Tetons's picture

Lately, looks to me like anyone holding treasuries is doing OK.  Add a little or a lot of USD appreciation....and....not many a tear would be shed...for the UST longs.  

fonzannoon's picture

This is the problem Grande, and Yellen knows it. It is why she is yelling that there is growth. This NFP tomorrow has to be big. She needs to start forcing the long end up ASAP because if not, there are big problems. I'd look for a big number and would be on the other side of the trade. I see 2.7% plus tomorrow post report. If not, watch out below (stawks).

Grande Tetons's picture

Could we be at a point where the market shrugs off a bullshit high side print? Maybe. 

fonzannoon's picture

I doubt it. I can see a bad print if Yellen is the scapegoat and it's time to finally embrace our nirpish future, or I can see the S&P 2000 celebration by June if We print 275k. Or anything in between. 

Grande Tetons's picture

I will make you a virtual sandwich bet that tomorrow's report is a miss. 

fonzannoon's picture

Interesting. I am still smarting from recent sandwich loss. However as long as this is not a real sandwich then you are on.

maskone909's picture

sometimes i must remind myself that we are doing pretty much what japan has for the last 30 years.  the only difference is that we are sort of the reserve currency.  untill something breaks thngs just tend to float on.  2008 was a manufactured crash too btw.  so unless they want to break it, it will continue.  maybe i am just jaded but the only reason to see a 275 print on the jobs retport is if they want it to print 275.  what ever medicine they must prescribe to keep it going they will.  untill they dont. 

fonzannoon's picture

"so unless they want to break it, it will continue.  maybe i am just jaded but the only reason to see a 275 print on the jobs retport is if they want it to print 275."

I would change "want" to need, but otherwise I agree with that statement. More importantly they need the reaction of yields to stop flattening, and they need it immediately. If they had a secret meeting the other day, I believe it was just to decide whether to go with 275k or 300k.

Grande Tetons's picture

2008 was a manufactured crash too btw

 I will see your jaded and raise you a skeptical in that all crashes are manufactured. 87 could be the exception or the pefect example. 

fonzannoon's picture

I think you and Maskone are aliens disguised as CIA spooks disguised as normal people attempting to extract information to bring back to your mother ship where your alien leaders are deciding whether to invade or short the long end and then invade.

Sorry_about_Dresden's picture



" 2008 was a manufactured crash too btw.  so unless they want to break it, it will continue"

You are correct and I think I, finally, found the smoking gun that started this whole shit storm and allowed the 1% to steal 11 trillion dollars.


I was reading about the Bruce Bent, Bent II and Bent III. The principles of "The Reserve Primary Fund"...the Money Market fund that broke the buck and froze the credit markets which, enabled Hank Paulson and Timmy Giethner to steal 780 billion dollars by comming and threatening Congress with that 7 page document that was supposed to be used to buy up "lower tranche portions of CDO", the so called finacial weapons on mass destruction. I found some article about one of the Bruce Bent the II being found guilty of one count of fraud so I started looking into the case, complaint, filed in the USDC Southern District of New York, case No. 08-cv-8060-PGG.

So I go online to PACER and download the complaint which is about 100 pages long.

The Bent family invented the very first money market fund, called the Reserve Primary Fund.

The $62 billion Reserve Primary Fund ("RPF") filed a Statement of Additional Information ("SAI") that prior to March 2006 the Bents and the RPF never owned or had ever purchased any commercial paper.

By mid-2008 the Primary Fund had bought, and was exposed to $785 million dollars in "Lehman Brothers" commercial paper. 

Now Bruce Bent created the RPF in 1970 and never bought or held commercial  paper. Bruce Bent used to joke "We don't drink, smoke, or buy commercial paper. And they didin't for 36 years until March 2006.

The complaint stated:

"Until 2006, the Primary Fund had a stated policy against investing in commercial paper. The 2005 prospectus, filed with the SEC on September 28, 2005 stated that"to furthur minimize investment risks, the Funds [including the Primary Fund] do not invest in commercial paper."

On March 15th, 2006 they again filed a statement with the SEC that "the Funds do not invest in commercial paper"

One week later the Reserve Primary Fund on March 22nd, 2006 filed a supplement to the prospectus and SAI for the Primary Fund, which noted the deletion of the paragraph that said the Primary Fund would not buy commercial paper.

Soon thereafter, and continuing through 2008, the Primary Fund Bought Lehman paper, Merril Paper and WAMU paper.

Commercial paper comprised more than 18% of the Primary Fund's assets by the end of August 2007.

Two months later, that figure nearly tripled and by August 2008, 57% of the Primary Fund's portfolio was in commercial paper.

In two years the Bruce Bent destroyed what took 30 years of careful management to build. I find no coincidence in these facts. The Primary Fund was the only fund that ever broke the buck. This was caused by Lehman Brothers bankruptcy which could have been easily prevented by the Federal Reserve as they did with Long term Capital in 1998.

This was a set-up. In 2006 everybody knew Lehman Brothers paper was crap because the CDS protection doubled to 510 basis points. 

I propose "the gang" of too big to fail orchestrated this whole crisis by using Bruce Bent as a tool to buy shitty commercial paper knowing Lehman would fall apart and knowing the credit markets would seize up and grabbing that TARP money.

maskone909's picture

And this time, Americans, and the entire world are the bag holders. Great post btw thanks. More insightful than anything on the "news". So either the Reserve Primary Fund was infiltrated or cleverly set up to fail. How convenient for Goldman to have perfectly timed their shorts.

Sorry_about_Dresden's picture

The tbtf knew the collaspe was iminent so they planned the credit freeze, using Primary Reserve, so they could profit on the inevitable. They also planned it to coincide with the first swatzas election to the Whitehouse as a diversion.

I would encourage everyone to read the complaint filed against Bruce Bent and Primary Reserve. You will see the credit collaspes was no accident.

They planned it and made their fortunes.

You can find the complaint filing on PACER.com. The number is in my earlier post.

LawsofPhysics's picture

This is simply the largest capital mis-allocation and mal-investment the world has ever seen...

hedge accordingly.

NotApplicable's picture

You mean it's not wonderful that the local Ford, Lincoln, Toyota, Scion, BMW, Mazda, Mitsubishi, Fiat, Mercedes, Nissan, Hyundai, VW, Chrysler, Dodge, Jeep dealer has over 6000 vehicles to choose from scattered over a couple dozen lots?

When I drive by those places, I've no idea how they can find any particular auto.

They should buy some drones.

border dog's picture

What a surprise.....like watching "walking dead"..

youngman's picture

Funny how the FOMC came out with what they did...they have these numbers too...they saw growth when in fack there was lack of growth...its now how much they lie I guess

LawsofPhysics's picture

Careful with the whole "growth" meme...

It begs the question;

Growth of what, exactly?  Cancer?

Bloody Muppet's picture

Careful with the whole "growth" meme...

It begs the question;

Growth of what, exactly?  Cancer?


Prison populations, the richests' bank balances, groundwater pollution, federal debt, personal debt, student debt, interest payments, inflation, TV channels, MJ use, company buybacks, unemployment, old people, cancer, poverty, underemployment, despair, restrictions on the freedom of the press, far-right support, political rhetoric and sinkholes.

tahoebumsmith's picture

And the scary thing is when this pozi scheme comes crashing down there is not going to be another 20 trillion dollar prop to hold it up again.

Brindle702's picture

I am going with "yes" too.

dizzyfingers's picture

"And the scary thing is when this pozi scheme comes crashing down there is not going to be another 20 trillion dollar prop to hold it up again."


Free global lifetime debit cards for everyone.

Kaiser Sousa's picture

funny how i knew that thursday would be the day to buy some MORE Silver cause it would be on sale courtesy of the MoneyChangers...

thanks again assholes......


and thanks again ZH for the calender of this weeks data releases and Fed bullshit sessions...

HaroldWang's picture

Thanks for this - I was wondering why we were rallying today.

B2u's picture

We can blame it on the rain...they were fake too....



Tjeff1's picture

Sounds bullish

QQQBall's picture

The FED was simply levitating asset values and recapitalizing the banking system.  Eventually we get "shared" austerity and privitization of services to "save money."