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Why The Fed Will Do QE4 (In 4 Ugly Charts)
While The Fed and its apologists (except for Jim Bullard) remain firmly attached to the idea that it is the 'stock' (or absolute level) of Fed Assets that represents the amount of policy-easement and not the 'flow' (rate of change), we have explained numerous times that this is complete rubbish. With the Federal Reserve balance sheet hitting 6-month lows this week, we thought the following 4 pictures would paint more than a thousand words on why The Fed will need to restart the flow soon... or the game is up.
The quiet, subtle decline in the Federal Reserve's balance sheet continued in April. As of May 1st, Gavekal notes the Fed's balance was at $4.47 trillion. While undoubtedly still incredibly large, the Fed's balance sheet is about $45 billion less than its peak level on January 16, 2015. Total assets at the Fed are back to levels last seen on October 17th. Total assets at the Fed have declined by nearly $29 billion over the past three months. On a rolling three-month basis, the Fed's balance sheet has been declining for the last two months.
And the three-month difference in total Fed assets has produced some interesting relationships since QE started. Below are some economic indicators that caught our eye...
All suggesting it is indeed the flow.. and not stock that has pumped everything... and now that it is officially in decline, Yellen is going to need to find an excuse to crank the flow once again...
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Ugly charts, bitchez!!
Ugly Chairman
True dat.
Too late for charts. The Euro is finally imploding. Got popcorn?
You only need one chart - the Fed's Z1 flow of funds report showing $58 trillion of outstanding credit market debt.
And yet they want us to believe they're going to raise rates. The chances of that are lower than whale shit on the bottom of the ocean.
I agree. Not sure why you're junked.
The October Surprise this year will be that you lived through September.
Somewhat solvent is paying bonus points.
I agree. Not sure why you're junked.
Thanks, nope-1004... I've got a few enemies here who love nothing better than to junk & run anything I say. I ignore them.
Upvoted but...
They will raise rates eventually. When they do it will be the tipoff that they are finally ready for the next step. Excercises like Jade Helm would seem to be part of the prep if not the implementation.
QE4 is a given, but what really matters is where will it go? helicopter drops? hell, no. the velocity of money would spiral out into hyperinflation. it will, instead, buy more chips at the casino.
Jamie and Lloyd will get into a bidding war for a $300M Lichtenstein (that is really worth $700K in a sane world), and the cost of a swanky getaway 4 miles underground in a desirable DUMB will skyrocket, but what else do they have to spend their ill-gotten gains on?
You got something out of all that QE too - you got to keep your job!
Yes, the rich got richer, but you were a beneficiary as well.
actually tons of people lost their jobs, and didn't get them back, or get 60% of what they earned
Plus the next squall is just now blowing in; so most of that benefit from QE is done with --- now that marginal utility of debt is 0 (negative??) --- should be fun.
You are talking to the wrong person. He is not a banker, government contractor, government employee, nor a paid shill like you. But I repeat myself.
"Keep stackin', bitchez!"
"Bullish!"
"We need MOAR!"
Zero Hedge lunacy is hilarious!
If they want the market to go higher than 18K and some change than yes.
What exactly makes you think they will tell us about QE4?
The spice must flow. See report: https://youtu.be/E_fzSc_i0Tc
As is now known from The Baranake's drivel and Yellen's vacuous insipid statements the Chair of the Federal Reserve is nothing more than a political bathroom attendant.
As they are nothing more than political tools they will (either overtly if necessary, but more likely covertly) Q4 as political cover in the run up to 2016 elections.
There is no economic motivation to what they are doing as the distortions and gutting of what's left of the economy are now obvious.
"the Chair of the Federal Reserve is nothing more than a political bathroom attendant."
Politicians are nothing more than Banker's bathroom attendants. The Fed is just the bicycle messenger between the two.
The sequel to the 2008-2009 crash will resume during the upcoming presidential kabuki theater election cycle, beginning soon and reaching full velocity by mid-2016.
All the digital $$$ printed and circulated have destroyed yields and true price discovery, forced asset managers and "investors" to grossly malinvest @ ridiculous levels, and all those digital $$$, now much of which are leveraged into to massive reams of debt pretending to collateralize/secure over-valued assets, will be vaporized in a very short time frame.
Clearly a distraction will be required.
the FED needs to stop pretending it has any control over what happens next. moving forward, it's economics 101
Stop it. I'm getting all misty.
Fun dumb mental
QE doesn't work. It's been well documented. It worked for the 0.001% and the whole world knows it.
More of the same will just get more of the same ... and tanks in the streets because 99.99% are starving and pissed off.
The reason the charts are ugly is because QE was basically removed and the patient is supposed to walk on its own.
Swim or sink is the Fed's new motto and if they keep it up, I for one will give them one iota of credibility.
If they don't keep to the script, they might as well never show up again for any meetings or make any further announcements.
I refuse to accept or trade in fiats if the Fed capitulates again.
Slip slidin’ away
Slip slidin’ away
You know the nearer your destination
The more you’re slip slidin’ away
Liberty is a demand. Tyranny is submission.
Is there really any assurance this shit parade won't get rained on even if they recrank the presses?
This shit is like running to the rooftop to escape a burning building. Eventually you run out of options.
Ha! You can always jump. At least you won't burn to death.
Maybe they will surprise us with some fiscal prudence...
The ONLY ugly chart I'm looking for, is the one that shows German and US Bond Yields going to ZERO.
When that happens, there will be no more Babylonian Towers of Fiat Debt to hide in, and their Derivatives will do a WTC7 freefall routine.
Look for dancing Libertarians on rooftops.
That is when they will bring out the guns, not for intimidation either.
Germans unable to get cash from ATM's: http://www.telegraph.co.uk/finance/economics/11585295/Welcome-to-the-one...
The spice must flow.
I've heard from numerous sources, probably similar to those you guys review, that the start of QE4 is what's going to send foriegners immediately dumping their dollar assets and running for the hills. Does anybody have any input on this? Will the process really be so sudden? They've certainly allowed this game to drag out muuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuch longer than I ever could or would have imagined, or wanted to.
I don't see why the fourth time would be the last straw.
We already heard QE3 would have folks running for the hills.
Let's face it, as much as you hate America, the almighty dollar is the best currency out there - and that ain't gonna change.
nah, not until QE12 or QE14.
there is no market there is only the fed
Let's see.....All congress Men/Women own stock and have inside knowledge...Special Interest the same....Lawyers are the Politicians who protect the Bankers...The Banks fund the Politicians....They All own Stock in one form or another as do thier family memebers...QE to infinity....
When Chuckie Schumer talks.....................
Bankers listen.
(snicker)
A 20% plunge would crank the presses up faster. One can always hope.
Zero Hedgers simultaneously pine for more QE and decry easy money.
On the one hand, they want to see their miserable gold "investments" go up; on the other hand, they profess a desire for fiscal and monetary rectitude, which would wreck said "investments".
Which is it, schizophrenic Zeroes?
Oh please. With $18 trillion in nominal debt, $200+ trillion in unfunded liabilities, and anywhere from $1 to $2 quadrillion in unrealized derivatives losses all looking for a home, it's pretty safe to assume that fiscal responsibility isn't coming back ever because one way or another those losses need to be made whole.
How about some structural reforms instead of financial magic tricks? Like reduce taxes, reduce size and cost of govnerment, let some bankruptcies be allowed to happen to clear the decks, put bank criminals in jail to make examples of them, end the FED, etc...
You know, the good old stuff that has always worked before.
Who says it's negative? How could that happen? Well, if the maturity rate exceeded the yield ... and they really didn't print more. Hmm.
Weird question: how exactly does the Fed's balance sheet shrink? I assume it can't write off/forgive debt, due to the 14th Amendment. That must mean some entity is buying the debt off the Fed. How does the Fed sell its bond assets? And what does it do with the proceeds of the sales?
Rickards says FED will do QE 4 and will involve tax cuts to the people (helicopter drops) and the FED sill buy the treasuries to pay for the deficits. Says it won't work either.
FED is in no position to cut taxes
Phone: Ring Ring
Congress: Hello, Congress here.
FED: Cut taxes.
Congress: Okey dokey.
Congress: Buy (bye).
Phone: Click.
'Fed's balance was at $4.47 trillion. While undoubtedly still incredibly large, the Fed's balance sheet is about $45 billion less than its peak level'
Big deal, they were printing more than 45Billion every month, lets just say the Feds balance sheet is still within a whisker of all time highs AND QE4 is on the way to pump it to the moon.
Here's a thought......
If the banks own the fed and its the banks that are now buying the US Treasuries, should the banks holdings of treasuries also be shown here somewhere?
Just sayin.
Squid
The FED will stop calling it emergency or QEx soon, and just call it MMT, and be done with it, until it collapses.
OK serious question. If flow is more of a priority, how come a shortage of collateral, (implicitly a shortage of stock?,) would appear to be more of a problem.