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What QE Actually Impacted
The end of excess liquidity & the end of excess profits always spelt the end of excess returns, as BofAML notes, especially as the hand-off from psychotic monetary stimulus to economic recovery has been so lame in nominal terms.
But, as Gavekal Capital explains, the 'gains' from QE are even more tenuous than previously believed...
The Federal Reserve’s balance sheet has now been relatively unchanged for about 10 months. Total asset at the Fed are about $61 billion higher than they were one year ago. It sounds like a lot but considering total assets are currently $4.48 trillion, $61 billion is a drop in the bucket.
During the various QE programs in the US, a useful template to track different market and economic indicators was to plot them against the 3-month change in total Fed assets (see some of our older posts here, here, and here). Now that we have gone nearly a year since the taper ended, let’s check in on some relationships.
QE certainly affected asset prices. For government bonds, yields widened as the Fed’s balance sheet expanded and have narrowed as the Fed’s balance sheet has stopped growing. For corporate bonds, spreads over treasury narrowed as the Fed was expanding its balance sheet and have since widened substantially as the Fed’s balance sheet has stopped expanding. Breakeven inflation expectations have dropped significantly as the Fed’s balance sheet has stopped growing as well.
Stocks were positively affected as well. The 12-month change in the S&P 500 has fairly closely tracked the 3-month change in Fed assets. Momentum in the market has also tracked the change in Fed assets.
The effect on economic indicators is much more mixed. QE seems to have clearly impacted the manufacturing PMIs. However, the effect on manufacturing IP itself is tougher to discern.
It’s tough to see if QE had much effect on house prices. And it certainly didn’t matter to the consumer or small business owners. However, it seems to have negatively impacted economic surprises and increased perceived macro risks in the world as it was winding down.
Finally, QE didn’t seem to make much of a difference for nominal GDP or employment.
Unfortunately, overall it seems that QE had a much larger impact on bond and stock prices than on real economic activity. Government bond yields widened when the Fed was expanding its balance sheet while corporate spreads over bond yields narrowed. Stock prices were positively impacted by QE as well and have lost a lot of momentum since QE ended. Manufacturing surveys, in the US and globally, have been affected by QE but real economic indicators such as employment, small business intentions, and GDP have shown little relationship to changes in the Fed’s balance sheet level.
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What QE Actually Impacted -Inflation of the dollar
Damn! So the Second article today on Money Mattering! Uncle Miltie would be proud.
More muttering about Money Mattering? Meh.
Muny, muny, muny... matters only when one does not have it.
Hank Paulson and his banker buddies are laughing all the way to their McMansions. Aside from the Iraq War, Paulson/Bernanke QE's were/are the greatest transfer of wealth to the upper 1% in the history of the USA.
" Yes we can! "
Exactly.
Do you actually think that the Fed would actually keep "stuff" on their books? That they would actually report it honestly? "Transparently?" LOL
What they and their various and multitudinous minions ACTUALLY hold is the greatest state secret never told--bigger even than the behind the curtain events of 9/11.
I'm sick of this shit.
If you want to affect the economy, the money has to actually get into the economy and not into the pockets of the 'special' people. They could of done a lot more with a lot less if they actually gave a shit about mainstreet instead of Wall St.......
It doesn't matter where the money went! You can't produce wealth by printing money! The stock and bond market reprecents precieved wealth and the QE unwinding effects are only at the very early stages. When Sh it hits the fan the ecoomy, the stock market and bond markets will all be in the toilet! Wealth can only be produced by production!
Until everyone realizes Hank Paulson and his buddies choreographed the whole financial crisis, installed the putter in chief and the wookie, to dazzle the sheep into submission as the local civilian police turned into paramilitary goons it will just get worse and we will get poorer.
I likes me chart porn.
I still can't get past calling debt or stawks an asset.
Now, the Hope Diamond (French Blue, for my continental friends, if I have any...lol) that is an asset!
I bought my wife a replica, available at the gift shop last time I was at the "mall".
I took it upstairs to do a comparo.
Not good, different cut and color if I remember right.
She keeps it in her junk drawer.
no chart of the nyc bankster Christmas...err HOLIDAY bonus pool? tens of billions every Christmas season to the blood thirsty money junkies
Next time give it to me and you'll see some changes.
It would sure put a hitch in my get-a-long.
I want my "all I got..." T-shirt
All I got:
Another day older and deeper in debt!
Fuck the pretty graphics.
The only effect dat de FED QE has had on real estate transactions is the historically, and hysterically low interests rates that lowered the cost to buy houses, to buy apartments and the cost to build them.
Dammit Janet, now what?
The only effect dat de FED QE has had on equity prices is the historically and hysterically low interests rates that lowered trader's margin rates, and encouraged corporate debt to engage in stock buy backs.
Dammit Janet, now what?
The only effect dat de FED QE has had on fixed incomes is the historically and hysterically low interests rates dat reduced interest income for the elderly and forced them into fucking government welfare programs.
Dammit Janet, now what?
The old people on fixed incomes are dead, or dying in their government welfare "pograms."
Raise the interest rates muther fuckers and watch the rest of them die.
Simple Dominatrix Econometrixs.
Then we danse.
Love,
Alexa
What's your thoughts Mr. Janet Yellen?
The Alchemy of Finance by George Soros Full Audiobook
https://www.youtube.com/watch?v=TI0V04dP4t8
Spinning wheels about to explode on little red wagon.
The Basel Committee's work programme for 2015 and 2016
http://www.bis.org/bcbs/about/work_programme.htm
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My Dad is Dead - World on A String - YouTube
QE was for the fucking banking cabal! They made out like bandits!
Auto loan and student loan vultures prayed on the sheeply.
Home sales are 63% less pre recceision!
Rents and multifamily construction up!
Exactly! An addict will always steal money for you myself instead of using it to rebuild infrastructure for their future.
Government bond yields widened when the Fed was expanding its balance sheet...
It would be moar accurate to say that the fed jacked with the prices WE PAY for t bonds. since all interest paid to the fed by the gubbermint gets immdiately given back to the gubbermint the net effect on the budget deficit is larger than what it may seem and thus the average yield did not widen from their perspective. there is no market, there is only the fed churning asset prices for the sake of the maggots.
There's something out there waiting for us, and it ain't no man. We're all gonna die. [/Billy, Predator]
Predator was pretty good
The past 30 years have been an illusion. The stagflation of the 1970s is reality under the central banks and DC central control.
When you look at true incomes, what do you get? Back to 1970s levels. So real estate and the prices of goods must return to 1970s levels as well.
I saw a shit house that sold for $165k in 1996 listed for $565k in Concord, MA. There weren't any improvements done other than things you would expect, like newer windows. Fine, you can say Concord is a town for the 1%, but why? It isn't THAT nice. There are a hundred towns in Ohio that are equal or better for 1/3rd the price. Funny how one of the villages that birthed the American Revolution is now a progressive playground.
You can't fix a problem unless you find and fix the source of the problem.
The source is the federal reserve. With a giant splinter in the path happening in 1971.
First we need to correct the 1971 error, which will return us to the main line. Real Estate will necessarily lose 3/4s of its value. The big banks will fail, so will most of the publicly traded Wall Street apparatus. The source of funding for the Free Shit State will evaporate. The immigration and ghetto problem will take care of itself, either by leaving peacefully or killed off by force.
At that point the true enemy of the people can be dealt with. The Federal Reserve system can be destroyed. From there a new republic can be born.
The current system has failed. There is no argument against that fact. It HAS FAILED period.
Actually i am so tired of will the fed do this or that bullshit,if the economy cannot absord a .25 to .5 per cent hike then it probably deserves to unravel and descend round the s-bend.
+1
$4.48 trillion in total assets and they started with nothing in 1913.
WTF?
What is the world GDP? $76 trillion. 4.48/76*100=6% of World GDP. Not bad for a hundred years.
Oh Oh