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The Chart That Explains Why Fed's Bullard Wants To Restart The QE Flow
Remember when the Fed (and their Liesman-esque lackies) tried to convince the world that it was all about the 'stock' - and not the 'flow' - of Federal Reserve Assets that kept the world afloat on easy monetary policy (despite even Bullard admitting that was not the case after Goldman exposed the ugly truth). Having first explained to the world that it's all about the flow over 2 years ago, it appears that, as every equity asset manager knows deep down (but is loathed to admit for fear of losing AUM), of course "tapering is tightening" - as the following chart shows, equity markets are waking up abruptly to that reality. So no wonder Bullard is now calling for moar QE - he knows it's all there is to fill the gap between economic reality and market fiction.
Tapering is Tightening.... as the flow of Fed free money slows... so equity performance suffers.
Of course it's not just the Fed (as Citi shows below) but for now the ECB seems unable to pull the trigger and the BoJ is hitting both political and market sentiment limits on its craziness.
And we better get moar... because the gap between perception and reality is huge...
Charts: Bloomberg and @Not_Jim_Cramer
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This time it's different. The same medicine isn't going to work. If they try that we will crash.
They will have no choice but to sidestep the banks and loan direct to consumer's.
The banks didn't cooperate. They were supposed to lower interest rates. They never did on revolving credit and other important areas.
YIPPPEEEEEE!!!
What can possibly go wrong?
Wait till you see how much the financial stocks will enjoy this one!
Isn't it time for the CB's (All of them) to get out of the way and force the politicians to address the structural problems. Monetary policy can only ever do so much but, at this point, it can't achieve anything more. Get to work Mr Speaker......
like a herion addict, one moar fix an it'll be alright, oh i'll quit tomarrrrrow...i promise, just one moar hit.
"the gap between perception and reality is huge"
my favorite quote in weeks.
But, but, but... I wanna print more moneeeeeeeeyyy.... Wah!....
Get ready for crazy lending standards (i.e. ultra loose) v2.0 bitchez -
- Fannie/Freddie EZ mortgages to deadbeat borrowers who will only need to put 3% down, with underwriting banks/lender indemnified against crazy town loan underwriting standards.
Yeah. Only idiots don't understand how it's all a giant Ponzi @ this point.
Reports: 2 mortgage giants plan to ease lending
http://www.usatoday.com/story/money/business/2014/10/19/frannie-mae-and-...
Nicole Curtis, USA Today
5 hours ago
October 19, 2014
Fannie Mae, Freddie Mac and private mortgage lenders are nearing an agreement that may lower restrictions on borrowers with poor credit, in an effort to boost lending amid a tepid housing recovery, according to published reports.
The two mortgage giants are considering programs that would make it easier for lenders to offer mortgages with down payments of as little as 3% for some borrowers, according to reports by Bloomberg and The Wall Street Journal over the weekend, citing unnamed people familiar with the matter.
It would mark a key loosening of lending standards for the mortgage giants and banks in the aftermath of the financial crisis of 2008, when credit requirements were made far more restrictive.
The changes, which could be announced this week, would help banks protect themselves from future claims of making bad loans, the published reports said.
Calls for comment Sunday to Fannie Mae and Freddie Mac were not returned.
Yep, the lie only works...
Until it doesn't!
Yeah what could go wrong ? There haven't been bond vigilantes since men wore hats and flappers. Where are the flappers?
I think QE will work again, but only one last time, and its half life will be shortened too
I think you are correct. They will try with the SDR, but I also think that they will try and NOT have any actual link with the Gold each currency has to back it.
"The banks didn't cooperate. They were supposed to lower interest rates. They never did on revolving credit and other important areas."
That's actually a really good point. I'd add that while they did reduce rates on term loans (like mortgages), they simultaneously erected qualification barriers that assured only those virtually guaranteed to be money-good would qualify for them (i.e. not the middle class). And even that is assuming there wasn't a downturn in incomes the last 6 years, which there has been.
you guys realize we're talking about Fiat Money here?....it's just all about "how long will it last," not "what do we do next."
yup, when fiat money dies,rip$.
Even Viagra/Cialis can't keep it up forever!
I doubt that demand for household loans is all that robust anyhow. The banks turned around and gave the capital to commerce and pension funds. Keep the debt economy propped up by pushing debt elsewhere.
A large part of QE was recapitalization though. It is the biggest off balance sheet transfer of impaired assets in recorded history.
The plan was to recapitalize the banks. IF the FED really wanted to push banks to lend, would they be paying interest on Excess Reserves?
The plan was to recapitalize the banks. IF the FED really wanted to push banks to lend, would they be paying interest on Excess Reserves?
Buffalo being pushed towards the cliff - -
QE4 is likely coming. Be prepared to trade it & don't fight the FED (I have and have lost $$).
NoVa
Yep, when bank loans start failing again, they will print. At some point foreigners will abandon the dollar. They already have, to a certain extent. At that point(less than 50% of world trade), trading against (buying gold & silver, shorting stocks & bonds) QE will be more profitable. You were just early.
they don't need consumers borrowing. They NEED small business borrowing. That happens, everybody is taken care of.
For that to happen requires multiple layers of reforms-with Tax and Regulatory relief at the top of the list. Repeal of the Patriot Act, and reinstitution of the 4rth and 5th Amendments would make investment worthwhile again.
Good luck pushing on a noodle otherwise!!
Feed me!
You cant leave now?
The Fed promised stimulus would stop at 7% unemployment, then 6.5%, now under 6% and they look
to pump. They held that it wasnt about holding markets up, but ONLY about the economy. We now know that is
all Bull Sh!T. Its about making the boys on Wall Street rich....all those who perpetrated the 08 debacle make it back in spades.
Stopping stimulus is now tightening....and Yellen said she would do nothing to harm the recovery....THEREFORE she can never stop stimulus, or even talk about it.
This is all about shifting money via an unfair return on savings, to the speculator...... from the saver, the prudent and the retired. Dont save...SPEND and borrow..
Lets face it. If stocks tank, again, every retirement plan projection, every pension plan, ever equity mutual is totallly and completely fubar.
it's no different than what they did to my precious metals. let the markets find thier own way and leave my tax money out of it. I am really tired of funding all these people that have no business in the markets. QE is bullshit
https://www.youtube.com/watch?v=5ea5jKFGgUw
feed me, Seymour, feed me all night lawng! (does it have to be blood? does it have to be human?)
They just prove time and again it is only about the market. If it were about the economy, they would welcome the lower rates and gasoline prices, not be looking to raise rates and gasoline prices and inflation.
Wasnt Bullard the idiot that scared the market into crashing in the first place just a week ago? Fker isnt even a voting member...now he turns around and says more QE? wtf? in...credible, as in no credibility to anything this cretin says.
There isn't anyone at the FED with any "credibility", and that includes the often quoted "hawk'", Dick Fischer.
The situation is totally FUBAR and they all know it so they have to lie about everything.
If that's all you got that's what you go with and they barely even have that.....
"I did not lie"
I would like to make a liquidity injection.
I'm gay not interested.
Dark hair dark eyes; If you don't speak Spanish, here's why.
BTFD or maybe BTHATH....or OSWO....(oh shit we're out....of lies)
Nobody cares about Bullard.
Only 3 individuals matter at the Fed:
Yellen
Stanley Fischer
Dudley
The rest just do public lobbying and collect salaries and speech fees
The market reacts to all Fed members speaking especially the influential ones. More importantly what I perceive occurs is a Fed member talks about QE and the central banks buy at the same time. The market aggressively moves higher off of the news giving the rest of the market players the impression they need to buy or get left behind. The desired outcome the Fed wants to see occurs while rewarding the central banks with higher prices from their recent purchases. It happens over and over again.
Central command wanted to move stocks up and wanted a trigger.
They sent Bullard out to talk
Obviously some people care - look at the market reaction. The bottom line is there are mostly speculators in the market now. They have been having a good time at the party and don't want it to end. They will hang on anything said as a reason to enjoy one more dance. They know it's last call- the Fed knows it's last call. The Fed is in the corner- they will take heat either way they go- QE or no QE. The market will crash without QE- they know it- we know it. It will be painful for everyone in the end except those who own the government- they will be helped- the rest of us are on our own. Prepare.
Very good observation.
The cancer (growing population) were led to believe that the mirage perpetrated by our economic system, forms of government, religion, education, and private money were real.
Well…. They will become desperate, as all these mirages turns to be fake.
And the population, especially Americans and Europeans, are not prepared.
the rumor is yellen has given up on helicopters and has instructed the chemtrail plaines to be filled with cash to be dropped from 15000 feet with the song pennies from heaven being blared across the internet, radio stations and tv.
the reason jawboning works is because there are no organic sellers, only naked shorts that cover every time a fed orifice blows a fart. there is no market, there is only the fed, and the speculators that try to front run it.
Help me, Obi-Wan Kenobi. You are my only hope. [/princess leia aka mrs. watanabe]
When all you have is a hammer, every problem looks like a nail, so the cliche goes.
They can only create fiat, it's just what they do. All reasoning will circle around and around until this plan emerges.
Doctor Strangelove has a plan....
LOL. ..... so how are Gold and Silver not rocketing higher !!!!!
I think it's the lack of velocity of moola. Folks and Corps. are hording cash, rather than spending it. When people get confident (or panic) they will spend more which should increase velocity=inflation. Gold and silver will go up then.....I think.
Prices are being naked shorted by the banksters. Hoarders are still buying. Eventually, QE will panic folks out of fiat. It will be like a stampede, an avalanche. When the herd gets spooked, watch out. Naked shorts will not hold it back. Physical markets will set the price, not Comex. That's exactly the point in time when some SOB, like McCain, will propose banning it!
Gold and silver are being managed. The Federal Reserve is in a corner. They will print until the Walmart crowd awakens and then there will an overnight reevaluation of gold to bring it in line with fiat in the system. If you don't have gold it will be too late. Those who are positioned with some gold will find themselves better off than those who have none. Would I spend every dime on precious-no but I would have some. As far as stocks go- it depends on your age. At 56 I'm out.
Bullshard. Bullarkey.
Wow, so "heckuva job Brownie" at FEMA is now the Heci of Job Bullard at the Fed?
Maybe not, Bulltard, full of Bullchit, whatever. A hit job man!
I think the Fed must admit the money printing cat is out of the bag when the correlation between its Balance Sheet and the S&P 500 index is higher than that of age and the death rate.
Either that or they can just look stupid denying it to anyone over the age of five.
This is a lot easier than it looks. What has the Fed accomplished? The enrichment of the .01% who can take advantage of the micro-rates for lending (actually merely printing) money and using it to buy risk assets. I guess the best you could think is that the idea is if you enrich that crowd they tip enough on their dinner bills and other transactions to enable the rest of the folks have enough money to buy food, gas, etc. Even "accumulate some assets" as the clueless (not really) Mr. Yellen suggests. Such horseshit. And it shows no sign of ending.
This can go on forever. And why would the beneficiaries of this policy not lobby for its continuation? The Fed has no other power. And there are no restraints. Congress foolishly gave this immense power to the privately owned Fed on a silver platter, and this power once given can not be taken back, except by force.
You wrote: "the .01% who can take advantage of the micro-rates for lending (actually merely printing) money and using it to buy risk assets."
Your assertion is false - anyone who can buy even just one share of any closed-end fund (eg Blackrock funds, as little as $5/share) can own unerlying assets that are leveraged with money borrowed at FFR + 0.25%.
SIC- I'm impressed. An actual argument and no name calling. Kudos to you.
So you sound like approve of Yellen's comment, that if you aren't in on the party you should accumulate some assets that do. I' m afraid that solution isn't available to most Americans trying to make ends meet with static wages and real inflation. They don't have the money to buy Blackrock.
but your post above is on track, with the exception that I think Wall Street has unquestionably benefited from ZIRP, and will continue to do so, and will not tolerate its ending. "Normal" business folk recognize the menace of ZIRP but have no power to end it.
NO, I definitely do NOT approve of Yellen or Bernake or the FED and their money & inflation creation fanaticism - they are making a major contribution to destroying everyone's earned money buying power and interest-earning power with their created money. In my opinion they are good examples of "domestic enemies", should be arrested & tried for sabotage & treason, and then executed after inevitable conviction by a court of wage earners & savers.
I could never forget my roots and the desperate decades-long struggle to gain financial independence, so I am ALWAYS on the side of people who actually earn their own income, and preserving the value of that earned money. I realize that because of horrendous taxes (sales, city, county, state, & federal) and runaway inflation of the essentials of life, that most people working for wages do not have enough "disposable" income to "dispose" of it in savings and investment.
Wall Street (ie traders) ARE benefiting from ZIRP, but ONLY because of the multiple carry trades that are used to apply HUGE leverage. Wall Street (ie traders) will ALWAYS find ways to profit in ANY conditions, BUT I assure you that the banks (esp smaller banks) and wealthy people would VERY MUCH rather have interest rates back to normal and driven by free-market supply & demand of earned money/savings. NO bankers are happy about record low net-interest margins and NO wealthy people are happy about having to climb far far far out on the risk limb of low-grade high-risk securities that are HIGHLY leveraged in order to earn normal incomes.
http://blog.modernmechanix.com/twenty-cents-out-of-every-dollar-of-the-income-of-the-people-is-the-cost-of-government-in-the-united-states/
i used to think there would be at least an attempt to normalize. now i think yields will skyrocket when everyone realizes they are holding junk paper and all that is left is a sofa king giant pile of worthless bonds the only thing left to do is send all the bonds to the next burning man e-vent
yada yada yamada
Notice on the first chart that a 13 week change in the Fed balance sheet of zero equates to about a -8% 13 week change in the S&P.
The FED originated a century ago as an instrument of the robber-baron era bankers to create a system of endless control & wealth creation for themselves.
But in the current era, the FED has become an instrument for academic & political hyper-liberal socialist coercive collectivists to finance endless government spending/debt at essentially zero interest while minimizing the cost of debt to the beloved proletariat masses and depriving the hated savers/rentiers of free-market interest income.
The FED will NEVER increase the FFR (short-term interest rate anchor), and will do whatever they can get away with (eg QE) to crush long-term interest rates, to maintain their political & ideological objective of ZIRP. There will NEVER be any wage inflation due to structural changes in economy, entitlement programs consuming both workers & earnings.
There is an endless rant from financial morons & ideological idiots about how the FED ZIRP is either planned & executed by the wealthy "elites" & bankers to enrich themselves - 100% PURE SHIT. I am among them all the time, know and work with many wealthy clients & bankers of all sizes, and they all HATE ZIRP - they all know that they can make a LOT MORE money with free-market interest rates.
Just imagine how much the federal government (ie politicians) would have to pay in interest expense on the outstanding debt if the interest rate was set by the free market based upon only earned & saved money instead of created money. The beneficiaries of ZIRP are the politicians who want unlimited spending at close-to-zero cost, NOT the bankers & wealthy "elites" who want interest rates to be as high as the market will bear. Open your eyes & minds, stop regurgitating distracting ideological garbage, wake up !!!!
The top 5 banks constitute about 80%. They're the ones with the bad loans. They're the ones we're all bailing out. It's that simple. Yes, I'm an idiot.
Ignorance and ideological blindness is a blessing for you, relieving you of the burden of actual reasoning instead of just being a propaganda drone. Clearly you do not understand how the financial system works.
They want to put a chicken in every pot, then hand the knives and forks over to the banksters
It's 110% about the market
They know without the buyer of last resort, there are no buyers and DOW sinks to 2009 levels or lower
Market action reinforces need for policy patience: Fed's Rosengren1 hour ago
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The Federal Reserve Bank of Boston's President and CEO Eric S. Rosengren speaks during the "Hyman P. Minsky Conference on the State of the U.S. and World Economies", in New York, April 17, 2013. REUTERS/Keith BedfordBy Jonathan Spicer
Related StoriesBOSTON (Reuters) - The recent volatility in financial markets reinforces the need for the Federal Reserve to be patient with its policy stimulus and to clearly tie an eventual interest-rate rise to improving economic conditions, a top Fed policymaker told Reuters.
Boston Fed President Eric Rosengren said that while it would take a few more weeks to understand the real economic fallout from the market selloff, he could "easily imagine" a scenario in which the U.S. central bank keeps rates near zero until 2016.
The sharp week-long drop in global stocks and bond yields abated on Friday, though investors remained on edge over increasing signs of a stumbling European economy and weakness in China and Japan. Amid the financial turmoil, futures traders placed bets on a later Fed rate hike toward the end of 2015.
"Patient monetary policy probably makes sense," Rosengren, a dovish Fed official, said in an interview over the weekend. "Certainly the events of the last couple of weeks probably give some credence to thinking about being patient as well as trying to process some of the movements we're seeing."
The key, he said, will be identifying any weakness in broader U.S. inflation and workers' wages, and not simply reacting to turbulence in markets like inflation-protected Treasuries, known as the TIPS breakeven rate.
Rosengren predicted the U.S. unemployment rate will fall to around 5.25 percent, from 5.9 percent now, by about the middle of 2016. He repeated that a rate rise should come about a year before that "natural" level of joblessness is reached, assuming inflation had risen to near a 2-percent target.
"If it starts looking like what we're seeing in financial markets is reflective of more underlying, real trends then there is reason for being more patient (on policy). I don't think we have that evidence today," Rosengren said on the sidelines of a Boston Fed conference on economic inequality.
Fed officials meet Oct. 28-29 to decide whether to shelve a stimulative bond-buying program as planned, and what language to use to telegraph when they will raise borrowing costs. The Fed currently says it will wait a "considerable time," though Rosengren and others want a more data- and less date-dependent policy statement.
The shifting predictions on the timing of the policy tightening and the sharp market rebound on Friday "just reflects the reason why we should be data-dependent," said Rosengren, who does not have a rotating vote on Fed policy until 2016.
Citing weaker food and energy prices, the policymaker predicted lower U.S. inflation over the next couple of quarters. He sees a bit less than 3 percent gross domestic product growth in the second half of this year.
No worries, Maria Bartaromo will come on at 9 and talk about how quickly the market bounced back and the emerging manufacturing renaissance in America. All is well, move along. Nothing to see here. When will someone figure out the velocity of money is fucking fantastic, but in the wrong fucking place. Duh!