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BofA Sees Fed Assets Surpassing $5 Trillion By End Of 2014... Leading To $3350 Gold And $190 Crude

Tyler Durden's picture




 

Yesterday, when we first presented our calculation of what the Fed's balance sheet would look like through the end of 2013, some were confused why we assumed that the Fed would continue monetizing the long-end beyond the end of 2012. Simple: in its statement, the FOMC said that "If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability." Therefore, the only question is by what point the labor market would have improved sufficiently to satisfy the Fed with its "improvement" (all else equal, which however - and here's looking at you inflation - will not be). Conservatively, we assumed that it would take at the lest until December 2014 for unemployment to cross the Fed's "all clear threshold." As it turns out we were optimistic. Bank of America's Priya Misra has just released an analysis which is identical to ours in all other respects, except for when the latest QE version would end. BofA's take: "We do not believe there will be “substantial” improvement in the labor market for the next 1.5-2 years and foresee the Fed buying Treasuries after the end of Operation Twist." What does this mean for total Fed purchases? Again, simple. Add $1 trillion to the Zero Hedge total of $4TRN. In other words, Bank of America just predicted at least 2 years and change of constant monetization, which would send the Fed's balance sheet to grand total of just over $5,000,000,000,000 as the Fed adds another $2.2 trillion MBS and Treasury notional to the current total of $2.8 trillion.

In other words, for once we actually were shockingly optimistic on the US economy. Assuming BofA is correct, and it probably is, this is how the Fed's balance sheet will look like for the next 2 years:

Or, in terms of US GDP, the Fed's balance sheet will have "LBOed" just shy of 30% of all US goods and services.

It gets worse:

Since the Fed is effectively becoming the marginal player in both the MBS and Treasury markets, a very relevant question is how much private market debt is left to sell. Short answer: not much. According to BofA's calculation, the Fed will own more than 33% of the entire mortgage market by 2014.

 That's half the story.

On the Treasury side, in just over 2 years, "Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014." You read that right: in just over 2 years, the Federal Reserve will hold two thirds of the entire bond market with a maturity over 5 years (which by then will be part of the Fed's ZIRP commitment, yield 0% and essentially be equivalent to cash).

No wonder that David Rosenberg is worried that the Fed will soon run out of securities to buy (well, there are always equities of course, but the Fed will not monetize those until some time in 2015 when hyperinflation is raging).

And speaking of hyperinflation (and our earlier note that nothing "else is equal") the real question is if indeed the Fed will own $5 trillion in "assets" in 27.5 months, what does that mean for gold and crude? The answer is plotted below:

In case it is unclear, the answer is:

  • $3350 gold
  • $190 oil.

Luckily the Fed has already factored all these soaring input costs (and "alternative money" prices) in its models, and there is nothing to worry about. Lest we forget, the Fed can crush inflation cold in 15 minutes cold... somehow. Even when unwinding its balance sheet would mean sacrificing 30% of US GDP and, let's be honest about it, civil war.

* * *

That's it in a nutshell. Those who are interested in the nuances of the BofA analysis, which is a replica of our own, can read on below:

The Fed Bazooka

Given our growth forecast, we expect the Fed to follow up the expiration of Operation Twist with an open-ended outright Treasury purchase plan at the December meeting. We expect the pace could be between $45 billion (which would be equal to the current size of Twist) and $60 billion/month for two years [in 10 year equivalents]. We expect a long program given the slow improvement in the labor market as well as the Fed’s focus on a “substantial and sustained improvement” in the employment situation.

Table 2 compares different asset purchase programs by the Fed in terms of the net notional and duration take-out. Were the Fed to engage in renewed Treasury purchases post the end of Twist (in the same maturity distribution), this could easily become one of the largest programs in terms on monthly 10y equivalent demand from the Fed. Note that even MBS buying takes duration out of private hands, which would put downward pressure on rates

Mortgages: Fed buys most of monthly issuance

We estimate that Fed purchases will take out about 60% of monthly MBS production. However, our mortgage strategists note that historically the Fed has concentrated its buying in 30y conventionals. For example, in August the Fed bought $23bn of conventional 30s, $2.5bn of conventional 15s and $3bn of GNs. This compares with gross issuance at $122bn, which is split into $88bn in conventionals ($66bn in 30s, $22bn in 15s) and $34bn in GNs. In other words, the Fed has concentrated 80% of its purchases among conventional 30y. A similar pattern would suggest that the Fed would buy an additional $30bn in this sector, which could end up being almost 90% of all issuance in conventional 30y. This explains the significant tightening in the mortgage basis, and would argue for the Fed to buy some other sectors as well.

In terms of outstandings, we expect the Fed to end up owning more than 33% of the total market by the end of 2014, which is also significant since many mortgage investors tend to reinvest paydowns. These investors would need to be persuaded to sell MBS to the Fed, which would require tighter spreads.

Treasuries: Fed will own a 45-50% in the long end in a year

Given our growth forecast, we expect the Fed to follow up the expiration of Operation Twist with an open-ended outright Treasury purchase plan at the December meeting. We estimate further what the potential ownership of the Fed could look like in the Treasury market over the course of the next two years. We assume that: 1) Purchase sizes are in the same distribution as Twist, sans the sales; 2) Treasury coupon auction sizes remain constant; and, 3) The Fed does not change the 70% per issue maximum SOMA limit.

Table 3 and Table 4 simulate the Treasury universe during the course of 2013 and 2014. Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014. Given the current issuance schedule, we believe it is very likely that the Fed changes its purchase buckets through the next round of Treasury purchases. In particular, the Fed will begin to run out of issues in the 8y-10y bucket and will be forced to buy newly issued 10y notes should they choose to maintain the same distribution. We believe this is unlikely, and that the Fed is likely to redistribute its purchases and possibly include the 5y portion of the curve to provide some room.

 

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Fri, 09/14/2012 - 20:50 | 2797686 Hedgetard55
Hedgetard55's picture

You are trying to reason with an imbecile, but good luck.

Fri, 09/14/2012 - 19:17 | 2797443 Venerability
Venerability's picture

Is good ole Merrill - i.e. BofA - trustworthy about anything right now?

I agree on the Gold call, although the POG will probably be capped at its FAIR inflation-adjusted current price, now about 2700, in 2013.

I don't agree about Oil, though, because the World, including OPEC, will find some way to cap it effectively before it causes another worldwide recession.

In the US, we truly need bipartisan cooperation on a National Energy Policy designed to make this country self-sufficient in Energy again.

Cooperation - including support of passenger rail - is needed more than cooperation on anything else, including the vaunted "fiscal cliff."

Let's hope Obstructionists on both sides of the political spectrum are not re-elected this time around.

Fri, 09/14/2012 - 20:00 | 2797552 AGuy
AGuy's picture

"I don't agree about Oil, though, because the World, including OPEC, will find some way to cap it effectively before it causes another worldwide recession."

Yeah, They'll price it in something else besides US dollars.

Sat, 09/15/2012 - 11:05 | 2798518 Venerability
Venerability's picture

Does the Koch Bot contingent believe they are truly discrediting me and helping themselves with these By-Rote "thumbs downs" on even my most inoffensive and non-controversial posts, as this one clearly was?

Zero Hedge is useful and attracts new readers and new attention only when there is some effort to be fair and balanced - like any other media outlet, broadcast or on-line.

If it is ALL nasty and silly little boys spouting Market Nihilist and Elitist scripts by rote, the site loses its impact and therefore its reason for being.

I think there needs to be a high level conference of Zero Hedge's various top input providers discussing this issue fast! before the site becomes just another Yahoo Finance-like entity.

Sites people want to read and want to participate in - which I assume is your goal as a media provider? - need to promote, let alone allow, diversity of opinion.

You insist on hitting people over the head with a sledgehammer, you lose virtually all of your readership.  

Fri, 09/14/2012 - 19:18 | 2797444 Atlantis Consigliore
Atlantis Consigliore's picture

http://youtu.be/bNmcf4Y3lGM    We need levity; wheres our HITLER VIDEO ON REAAL ESTATE , where bernanke? invited out?

how about a Bernanke video?

 

 

 

Fri, 09/14/2012 - 19:20 | 2797450 Everyman
Everyman's picture

This goes on for "2 years" there are gonna be a lot of dead people at the Federal Reserve and the building will probably end up getting bombed.

Fri, 09/14/2012 - 19:25 | 2797467 zerotohero
zerotohero's picture

OH man did you just say the "bomb' word on line - dude their watching..................

Fri, 09/14/2012 - 20:38 | 2797650 Everyman
Everyman's picture

Well it won't be me.  Just sayin' the Fed Res and oligarchs are pissing LOTS of people off, and you can't put ALL the murderous crazies in jail!  Hell, the don't put financial crooks that steal billions of dollars in Jail either

I just think we are in for a very violent decade that makes the 60s look like a cake walk.  There will be no "Peace,  and Love, baby", it will be "Gimme my God Damn Fucking money back you low life academic moronic criminal".

Fri, 09/14/2012 - 20:39 | 2797652 ZeroAvatar
ZeroAvatar's picture

He actually meant someone would paint a 'smiley face' on the exterior.

 

Whadaminit....there's a knoc

Fri, 09/14/2012 - 19:29 | 2797475 Martial
Martial's picture

and if mideast war/ww3  you can double that $190.

Fri, 09/14/2012 - 19:48 | 2797523 lolmao500
lolmao500's picture

Don't worry, the Iranian war will pay for itself. Ask Bibi.

/also, a draft will employ so many people, Ben will be able to stop QE!

Fri, 09/14/2012 - 20:03 | 2797570 centerline
centerline's picture

DHS will need lots of folks to maintain civil order.  Housing and 3 squares will look great by then.

Fri, 09/14/2012 - 19:32 | 2797481 Pancho Villa
Pancho Villa's picture

70's redux. In the 70's, Fed chairman Arthur Burns felt 6% unemployment was unacceptable and kept trying to stimulate the economy to get back to the 4% unemployment rate that was considered normal then.

Result: prices rose rapidly but unemployment remained stubbornly high. The more things change, the more they stay the same.

Fri, 09/14/2012 - 21:22 | 2797770 Westcoastliberal
Westcoastliberal's picture

Sorry Pancho, I too would like things to replicate something like that, but what we're seeing now is different in a very evil way.  This time the take-down is designed to be permanent.  You'll not be able to recover.

Fri, 09/14/2012 - 21:56 | 2797830 Overfed
Overfed's picture

There was still a real manufacturing sector in the US in the '70s.  Not so much these days.

Fri, 09/14/2012 - 19:42 | 2797505 JR
JR's picture

The biggest factor to consider is that Bernanke is creating destruction.

Destruction is not open ended; it does not go on forever.

It becomes like bowling pins; all the pins falling into each other. As Bernanke rolls the bowling ball and hits the pins, the pins start to hit each other. When unemployment gets worse and Bernanke rolls out more of his tools, the unemployment, the housing, the manufacturing, the exports, all of these economic factors begin to topple and crash into one another.

It’s a long time to 2015. And to assume that the country is just going to sit by and let Bernanke destroy retirement, manufacturing, employment, savings and housing, and say, “Gee, he needs to try again,” is not going to happen. Already a lot of people are saying Bernanke is wrong, that the Fed is panicking, that the banks are insolvent and that Bernanke’s only goal is to renew their reserves.

Bernanke is not building a system that will be lasting and contribute. He’s tearing down the greatest free enterprise system the world has ever known. In the first place, Bernanke and his governors are lying about the recession. Nor is there a recovery. It is an economic downturn that is not improving. And what does Bernanke do? He just keeps tearing it down.

As the Lehmans, Countrywides, Wachovias, Merrill Lynches, etc., fall, they meld into the bigger banks and the big banks continue to get bigger and more powerful. Already the bankers are running the political system in America, siphoning off most of Wall Street. When they finally own almost everything, the economy will collapse completely because Americans are not going to work for nothing. And the bankers are going to insist on some kind of slavery.

In short, IMO, there’s going to be a bloodless economic revolt before 2015 to take these people out. Too many analysts underestimate the America people.

 

Fri, 09/14/2012 - 20:02 | 2797563 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Bloodless revolt? Don't know about that...

Fri, 09/14/2012 - 20:02 | 2797564 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Bloodless revolt? Don't know about that...

Fri, 09/14/2012 - 21:17 | 2797752 djsmps
djsmps's picture

We are in The Great Recovery!

Fri, 09/14/2012 - 21:20 | 2797765 Westcoastliberal
Westcoastliberal's picture

The societial fabric of this and other countries is stretched to about the limit and at some point will collapse in on itself.  Understand that Bennie Boy is not trying to "fix" the "problem". The objective is Lords, Ladies, Barons, Serfs and Peons as in days of old.  I'm NOT kidding.

Fri, 09/14/2012 - 19:43 | 2797510 you enjoy myself
you enjoy myself's picture

when is Congress going to assert some power over the Fed, ideally by removing the "full employment" part of its mandate?  i know its all bullshit, but Ben is supposedly operating heroically to maximize employment and stabilize prices - how is he allowed to completely abandon one mandate in a destructive, futile quest to show slight improvment in the other?  why is he being allowed to kickstart massive inflation under the guise of trying to get U3 to 7% (as if shifting MBS garbage from the banks to the taxpayers will do anything)?   i'm blown away that Congress critters other than Paul haven't questioned Ben's authority to ignore his price stability mandate.

and when exactly will Ben get arrested for lying to Congress about monetizing the debt?

Fri, 09/14/2012 - 19:59 | 2797547 XitSam
XitSam's picture

Congress? Ha! Congress gave the responsibility to the Fed so they would have someone to blame. As to your final question, when Ron Paul is president.

Fri, 09/14/2012 - 19:46 | 2797516 lolmao500
lolmao500's picture

Lest we forget, the Fed can crush inflation cold in 15 minutes cold... somehow.

Raise rates, declare the FED a private entity (which it has been all along) don't pay bondholders.

Go with FED 2.0.

/wouldn't surprise me if they pulled that crap... that or the taxpayers bail the FED out.

Fri, 09/14/2012 - 19:55 | 2797540 Paracelsus
Paracelsus's picture

If they tore Bill Clinton a new one for seducing a White House tart,why can't we nail Bennies' testicles to the door of the Fed for this.

This the third time now and nothing has improved. Barter system here we come....

I keep thinking about the little kid who points and says "the Emperor has no clothes".

Fri, 09/14/2012 - 20:06 | 2797580 nmewn
nmewn's picture

They can't believe the plebes don't want to go into debt for the good of the country...they are, completely clueless.

Lets keep them that way ;-)

Fri, 09/14/2012 - 21:14 | 2797745 Westcoastliberal
Westcoastliberal's picture

You hold, I'll swing the hammer!

Fri, 09/14/2012 - 20:02 | 2797561 Bowgett
Bowgett's picture

The question I have now is who is going to buy new US debt? US has a deficit of $1.16 trillion/year or $97billion/month. Before FED bought most of it and who is going to buy it now?

Fri, 09/14/2012 - 20:10 | 2797592 lolmao500
lolmao500's picture

The primary dealers and China. Through proxies.

Fri, 09/14/2012 - 20:11 | 2797595 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Joe sixpack has no clue what happened yesterday. If you told him a 4trillion bank bailout was just announced, he would shrug his shoulders. If you told him a plan to pay each unemployed American 80000 dollars was announced, he would be enraged, even though the impact to taxpayers would be identical(asTyler pointed out). Go figure

Fri, 09/14/2012 - 20:50 | 2797682 Tyler Durden
Tyler Durden's picture

The Fed is buying all of the debt that matters: that in the 10-30y bucket. Everything else is peanuts. Of course, if the yield on the 5 or even 7 year spikes under ZIRP, it's game over.

Sat, 09/15/2012 - 00:05 | 2797998 “Rebellion to t...
“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

We'll see a black swan interest rate spike that will perplex the so called experts who are systematically looting our nation of its assets.  This asshole Bernanke is not omnipotent!  The time is near this Bull shit QE is going to come to a screeching halt.  When the fed stops buying, and they will sooner rather than later, look out fucking below!  Treasury prices are going to plummet and yields will be in the mid teens.  Bernanke had better find himself a good hiding place.

My A-hole moocher/banker friends try and convince me Bernanke is doing a stellar job; he along with Hank Paulson saved the world as we know it.  Personally, I'd rather see no firm, bank, or any corporate interst receive ANY federal help ever.

I want to see a Bullseye on the top of Bernanke's head, so any and all birds can find a great place to take a messy shit.

Fri, 09/14/2012 - 20:05 | 2797577 resurger
resurger's picture

Ra's al Ghul is full of shit.

Have a nice weekend bitchez

Fri, 09/14/2012 - 20:11 | 2797594 monopoly
monopoly's picture

First, how is this scenario ever going to create enough jobs to make the govt. happy. As inflation rages, we spend more on essentials,  buy less toys and that will lead to less jobs, not more. So that will never happen.

Next, at some point, the "funding crisis" begins. When nations are not willing to buy our worthless paper, what do ya think will happen to interest rates. Huh? Govt. cannot keep them down if our trading partners say "No mas". Then, and only then will the Fed be forced to Stop. That is when the shit hits the perverbial fan, interest rates sky rocket and the depression moves into stage Three. Then, it all blows up, kaput!, and finally Congress does something right. (Assuming we are not taking over the streets). But that is at least 18 months down the road. Till then, continue to do what we do here at Zero Hedge. 

"Houston, we have a problem.

Fri, 09/14/2012 - 20:23 | 2797622 DavosSherman
DavosSherman's picture

Bofa, what fucking morons.  $150 oil is the economic kettling point.  Second, gold should be over $3,400 TODAY.

Bofa, go make some more assinine derivatives you fucking inept pos morons.

Fri, 09/14/2012 - 21:14 | 2797748 Threeggg
Threeggg's picture

Looks like they did a good job making them as Gold is up $35 since the announcement of QE4ever

 

$35

Sat, 09/15/2012 - 04:24 | 2798177 Haager
Haager's picture

Oil, gold, silver...

Some evil ghost whispers something about a rigged market into my ears...

Fri, 09/14/2012 - 20:39 | 2797651 pragmatic hobo
pragmatic hobo's picture

ah, the linear projections ... the weapon of mass destruction for lazy morons.

Fri, 09/14/2012 - 20:40 | 2797653 goldfreak
goldfreak's picture

this lines up with what Jim Sinclair is saying gold 3500 in one to three years.

Fri, 09/14/2012 - 20:43 | 2797661 Tombstone
Tombstone's picture

B of A has ZERO credibility with me.  They are forgetting the real possibility that Benny will have to cough up $10-15 trillion to keep other parts of the world from caving in to a tsunami of debt.  Especially Europe, where despite the previous announcements, nothing much has changed.  By 2025, I expect our deficit to top $30 trillion and Benny to be leveraged over 200-1.  Oil could easily double from here and gold could triple.  Finally, the cost of owning you own cave will increase 100 fold. 

Fri, 09/14/2012 - 20:44 | 2797668 topspinslicer
topspinslicer's picture

Besides the obvious open ended QE means they don't have to trouble us with telling us every time they drop a trillion here and a trillion there  -- they have already done so by saying up front it's going to be open ended.....

Fri, 09/14/2012 - 20:50 | 2797683 endicott glacier
endicott glacier's picture

While you are listing value of gold and oil with the 5T balance sheet, you are forgetting mentioning that S&P500 will be 2607 and Dow at 24200 assuming same linear projections as oil and gold. The real questions are:

-will gold and oil provide better protection of assets, should the FED program not work as intended or fail?

-will balance sheet expasion translate into price expansion of of gold/oil and stocks in a similar way or does one asset get more suppressed than other (either by force or otherwise)

If the answer to first question is no, would people be better owning owning stocks (majority of portfolio)? the answer to second question is harder

Fri, 09/14/2012 - 23:28 | 2797978 honestann
honestann's picture

Not really.  This is the classic scam-a-doodle-dandy miscalculation.  Assume you have a stock that doubles as the value of the dollar falls in half.  When you sell that stock, you must pay taxes on the fictional gain --- fictional because the value of the stock has not changed, only the price in dollars.  However, anyone with half a brain eventually swaps any gold and silver they accumulate for other goods.  Either that or someone "stole" their gold and they have a loss (generally not a wise idea, unless things get extremely wild).

Fri, 09/14/2012 - 21:05 | 2797725 cranky-old-geezer
cranky-old-geezer's picture

 

 

If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."

Saying they'll buy MBS until employment improves is bullshit.  There is NO connection between the two.  

"Till employment improves" is just a cover story.  Printing currency and buying junk paper from Wall Street banks does nothing for employment nor the economy. 

They're really saying they'll buy MBS till hell freezes over.

And no, there won't be "price stability".  They're ignoring how QE debases the currency.   Not that they care.

Statements like the one quoted are fairy tales and fantasies. 

Fri, 09/14/2012 - 21:11 | 2797738 Westcoastliberal
Westcoastliberal's picture

Of course it's a cover story.  Every news item that spews from D.C. & Wall St. is a cover story.

Sat, 09/15/2012 - 04:09 | 2798176 Haager
Haager's picture

Duh!

Should they tell the truth, risking the sheeples to get awake?

Fri, 09/14/2012 - 21:10 | 2797733 Westcoastliberal
Westcoastliberal's picture

Oh My God! Zerohedge MORE CONSERVATIVE than BofA?  Isn't that the 7th sign of the apocalypse? Somebody call Clif High!

Fri, 09/14/2012 - 21:10 | 2797735 blunderdog
blunderdog's picture

The Fed is going to accumulate enough assets on the balance sheet to create a "dollar fusion reactor" and solve the energy problem.  The patent fees will pay off the national debt.

Fri, 09/14/2012 - 21:12 | 2797740 GernB
GernB's picture

 until such improvement is achieved in a context of price stability

There's the kicker. What if they can't achieve improvement without causing price instability? What would the balance sheet will look then?

Fri, 09/14/2012 - 21:23 | 2797771 GernB
GernB's picture

Actually, I was looking at the chart and realized it's probably inaccurate.

Once the Fed starts buying MBS it will take increasingly larger purchases every month to keep the market from contracting. Therefore the curve is exponential and the Fed will either a) reach 30% much sooner or b) go much  higher than 30%.

Before that happens the Fed balance sheet wiill become the news and anyone who can extrapolate a curve will see that it all must end soon because exponential growth is unsustainable.

Sat, 09/15/2012 - 00:45 | 2798059 MiltonFriedmans...
MiltonFriedmansNightmare's picture

So, the Fed will soon own the world and subsequently divide the loot equally amongst the plebes. Probllem solved....I need another bourbon.

Sat, 09/15/2012 - 00:45 | 2798060 MiltonFriedmans...
MiltonFriedmansNightmare's picture

So, the Fed will soon own the world and subsequently divide the loot equally amongst the plebes. Probllem solved....I need another bourbon.

Sat, 09/15/2012 - 00:45 | 2798061 MiltonFriedmans...
MiltonFriedmansNightmare's picture

So, the Fed will soon own the world and subsequently divide the loot equally amongst the plebes. Probllem solved....I need another bourbon.

Fri, 09/14/2012 - 21:33 | 2797796 ekm
ekm's picture

Don't worry about stock market monetization.

Fed buys bonds from Primary Dealers and Primary Dealers buy stocks with that money. What else are they going to do with that money?

By the same logic, Primary Dealers would be owning 2/3 of the stock market by 2014 if not 100%.

 

Remember, stock market is only 9% of the world securities market. So probably, probably Primary Dealers currently could be owning 2/3 of it.

Fri, 09/14/2012 - 22:15 | 2797855 devo
devo's picture

This isn't going to end well.

Fri, 09/14/2012 - 22:20 | 2797857 slingshot
slingshot's picture

as oil increased over $100 today, short sellers moved in to keep the price in check   Im sure Ben has notified Goldman ect that they have to maintain price control over oil.

Fri, 09/14/2012 - 22:31 | 2797859 JuicedGamma
JuicedGamma's picture

"If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."

The beatings will continue until moral improves.

Fri, 09/14/2012 - 22:37 | 2797881 orangegeek
orangegeek's picture
  • $3350 gold
  • $190 oil.

 

which would mean the US dollar would tank.

 

which would mean the Euro would sky rocket - the Euro - the same currency that represents bankrupt countries - remember PIIGS anyone?

Fri, 09/14/2012 - 23:02 | 2797917 seek
seek's picture

It might seem like it some days, but the FX market isn't zero sum (the moment you reference it to tangibles like gold or oil zero sum goes out the window), and there are WAY more currencies than USD and EUR. So your assumption is bad. (I didn't downvote you, btw.)

 

Sat, 09/15/2012 - 04:06 | 2798175 Haager
Haager's picture

Indeed. EUR > $1.40 within 2 month. And I'm not Stolper, but there are still some downside risks up to $1.275, mostly due to bailout requests. That, at least, is what my crystal ball told me.  

Fri, 09/14/2012 - 23:13 | 2797941 IridiumRebel
IridiumRebel's picture

Quantatative Fleecing

Fri, 09/14/2012 - 23:23 | 2797966 cranky-old-geezer
cranky-old-geezer's picture

 

 

Since 2008 Bernanke has pumped trillions of dollars into the financial sector while completely ignoring the economy at large, which has shrunk 30% probably.

Now he says he'll keep pouring money into Wall Street until Main Street improves.

Can you see the idiocy in that?   How is pouring money into Wall Street going to help Main Street improve?

It won't.  It hasn't and it won't.

He's actually looting Main Street.  Stealing wealth from the economy and the people, giving it to Wall Street (and the government for playing along).

Unless Bernanke and people like him are stopped, America has no future. 

Unless we end the Fed and go back to sound money, America has no future.  Bernanke and those like him will run the printing presses and pour money into Wall Street until the currency collapses and becomes worthless.  

That's called hyperinflation by the way. 

Yes, Bernanke is taking America into a hyperinflationary depression that will end in currency collapse, just like Weimar Germany, Zimbabwe, etc.

We thought it couldn't happen in America.  It wouldn't happen in America.  We're too smart to let it happen. 

But it is happening right in front of our eyes.

Fri, 09/14/2012 - 23:32 | 2797981 JR
JR's picture

Geez, I don’t know who you are but I shur duz love ya!

 

Fri, 09/14/2012 - 23:21 | 2797967 equality 7 2521
equality 7 2521's picture

This is great. Now that the FED is buying my mortgage with money printed out of thin air, I'll shall pay them in kind. I love the fiat system.

Fri, 09/14/2012 - 23:27 | 2797976 cxl9
cxl9's picture

On the bright side, with enough currency dilution we might see sufficient wage inflation to push the bottom half into a positive tax bracket. Then the fun begins.

Fri, 09/14/2012 - 23:33 | 2797983 honestann
honestann's picture

That's $3350 per gram, right?

Fri, 09/14/2012 - 23:46 | 2797996 dwdollar
dwdollar's picture

Can someone please tell me how inflation creates jobs? I don't want an academic thesis or a paper on inverse correlations from the past 100 years (as if that's enough data to establish a conclusion on such an issue). Just some real world examples.

You know, like... "Joe's bank account is being inflated away, so he decides to go out and work for George." So how does George employ anyone new when his business account is also shrinking?

Thanks.

Sat, 09/15/2012 - 00:17 | 2798032 edifice
edifice's picture

Oh, that's easy... George hires Joe to cart the wheelbarrow of FRNs around, for him. Joe's pay is whatever blows off the top of the stack, while the cart is in movement.

Fri, 09/14/2012 - 23:43 | 2798001 GlomarHabu
GlomarHabu's picture

 

 

Both Wall Street and the government can churn our more rubbish faster that 1's' and 0's can be run or trees cut down. That's all well and good . The thing they both miss and everyone misses is the exogenous event that in military terms is know as a BOOB, Bolt out of the blue. They are always huge game changers. Then it becomes the shoulder shrug and the hand palm to the forehead.

In the meantime we continue down a path charted by FDR in the 30's and America's flirtation , which is now a full blown love affair by the Socialist Democratic Party, of Marxism. "Their total support, and bought into now by a huge segment of the US population is the 1875 Karl Marx dictum, "From each according to his abilities , to each according to his needs". There is absolutely no way to dodge the reality that this is the keystone to what the Socialist Democrats ( and their worldwide support by commmunists eg, obamas plea to the Soviets not to cause trouble so he can have a free hand in a second term ) are straining to achieve as a final victory over Adam Smith's invisible hand.

So truly the main point of Tylers offering is CIVIL WAR.  Which exogenous event ignites it is obviously unknowable by definition, but it's coming is simply a matter of time. The rest of the entire thread, the charts, the B of A anaylsis, is simply garnish as are most all of the threads every day.  Alea iacta est    We read the thinking  on these pages every day by contributors who are so transparently totally dedicated Marxist it's not even debateable. The challenge for them is that the other half of this country will not go peacefully into the night, and that half owns most of the survival knowledge, skills and most importantly the guns.

Sat, 09/15/2012 - 00:14 | 2798028 ebworthen
ebworthen's picture

FED jizz fest to continue into perpetuity.

Wally Street to get the "O" moment, main street to get it in the face.

Hedge accordingly dear friends, this cake is baked and the frosting is on the way...

Sat, 09/15/2012 - 01:01 | 2798077 JR
JR's picture

Our problems are solved.

________________________________

Vice President Joe Biden Calls Hispanics 'Most Powerful Force in American Politics' (ABC News)

Vice President Joe Biden described the Hispanic population in this country as the "most powerful force in American politics" during a speech to the Congressional Hispanic Caucus Institute Gala in Washington, D.C. Thursday night.

"I'm here to say thank you, and tell you how much this great country owes you and how much more can be done with the infusion of new blood, of new ideas," Biden said. "Ladies and gentlemen, you are about to become, and already have, the most powerful force in American politics. Exercise that power well, and the country will embrace you."

The Census Bureau says the 52 million Hispanics in this country accounted for 16.7 percent of the nation's population in 2011, and the Pew Research Center has predicted nearly a third of the U.S. population will be Hispanic by 2050, a projection that Biden says Americans have embraced.

"The rest of America is beginning to understand that your success is America's success," Biden said. …

 

Sat, 09/15/2012 - 01:33 | 2798116 ebworthen
ebworthen's picture

Success...just like debt to solve a debt crisis...

Sat, 09/15/2012 - 01:14 | 2798099 Atlantis Consigliore
Atlantis Consigliore's picture

Quote of the year:  Moneyball:  Ill trade you Bernanke and a Dec 2014 Treasury Head Draft pick  and 8% 5 year bonds at 95 under par, for Corzine as head of the fed.

What?  Another 5 - 10 Trillion on the FED balance sheet?   Trillions printed?  

What trillions?

It Vanished and vaporized and I know nothing.

Sat, 09/15/2012 - 01:15 | 2798100 Atomizer
Atomizer's picture

 

 

Let’s just pimp this Bernank inflation [infinity to beyond] model to work off our debt. Unfortunately, everyone has figured out our silent auction SIV debt repackaging program. Our revenue is no longer generating a positive cash flow. We need other international entities to be handed the baton. Don’t worry you little fucking muppets, we see the same graph as you. New deep pockets are simply work in progress.

 http://research.stlouisfed.org/fred2/series/BASE?cid=124

 

LMFAO

 

Sat, 09/15/2012 - 01:21 | 2798105 Paracelsus
Paracelsus's picture

I am getting a little upset by this.I didn't think he had the cojones to do it a third time. If a person gets artistic and prints a $50 note you get a nice visit from the secret service (if they can spare time from ho chasing).If Benny pulls a few trillion from his sphincter thats okay,and our great,great grandkids get to pay.

I strongly believe that there will be a tipping point in each country,when then cops get sick of bashing grannies and spraying pepper spray on their brothers and sisters.Once the cops and military "go over",then and only then will change occur.

Sat, 09/15/2012 - 10:58 | 2798504 Clashfan
Clashfan's picture

Difference: He's giving it to the banks, and the "counterfeiter" is not.

Sat, 09/15/2012 - 17:32 | 2799294 snblitz
snblitz's picture

The treasury agents do not show up.

I was cleaning out a 30,000 sq. ft. building for a friend in preparation for sale.  I came across a pile of $20 bills printed on sheets of paper.  Maybe 50 sheets (3 feet by 2 feet).  I called the police.  They asked (over the phone) how realistic they were?  In the end they accepted (over the phone) that I would shred them. (which I did).

Sat, 09/15/2012 - 01:34 | 2798111 tahoebumsmith
tahoebumsmith's picture

Reminds me of Madoff in his last days in the penthouse...

http://i1-news.softpedia-static.com/images/news2/Bernie-Madoff-Is-a-MacB...

And please note how much the Apple stands out.

Sat, 09/15/2012 - 01:44 | 2798121 GlomarHabu
GlomarHabu's picture

 

 

The coming civil war and the great paradox of the rich.

Those who are already absurdly wealthy thanks in large part to the idiocy of mr. bernanke are generally thought of as being so well insulated from any violent travails that may befall this country that they will not , and cannot be gotten to. This is as absurd as mr. bernake's acedemic otherworldly Fed policies.

For as Ben franklin said, Those who are secure are not safe. It would appear to the unenlightened that this is also absurd. It is not. It is one of the great paradoxes of history. Those uber wealthy who are by birth US citizen but philospohically consider themselves "citizens of the world" given their ability for mobility and multiple residences will never be able to escape world wide revolution. Should a civil war in the US occur as I fully believe it will they will be able to run  but will be unable to hide. They can hire a phalanx of protectors but as we have seen even a US Ambassador isn't safe in this world.

They will eventually be hunted down. It always happens, and their dues becomes due on demand. Where would they go anyway in todays world to hunker down? As sytems fail how will they access their wealth? They still must eat and drink.

No their fate is as certain as the fate of the millions who will perish, and it would be no surprise to see a US civil war germinate a redux of Europe ,circa 1848.

No, those who are secure are not safe.

Sat, 09/15/2012 - 01:58 | 2798131 jmk
jmk's picture

He obviously believes the consequences to an alternative to QE 3 are worse for him, the Banksters, or whomever. He isn't just doing this for shits and grins so he--

Might as well be hung for a sheep as a lamb.

Sat, 09/15/2012 - 02:09 | 2798138 Atomizer
Atomizer's picture

Thanks for your post jmk. You can now explain to your sheep herd how you’re a lamb.

 

 

When the multi international corporations get desperate, genocide becomes the charter business rule. 

http://www.bilderbergmeetings.org/index.php

 

31 May-3 June 2012 Chantilly, Virginia, USA 

  • The State of Trans-Atlantic Relations
  • Is Vigorous Economic Growth Attainable?
  • The Future of Democracy in the Developed World
  • The US Political Landscape
  • The European Political Landscape
  • A Conversation on US Foreign Policy
  • The Politics and Geo-Politics of Energy
  • Stability and Instability in the Middle East
  • Imbalances, Austerity and Growth
  • Sustainability of the Euro and its Consequences
  • What Does Putin 2.0 Mean?
  • What Can the West Do about Iran?
  • How Do Sovereign States Collaborate in Cyber Space?
  • China's Economic and Political Outlook

 

Welcome to the idiots who create chaos. You’re expected to reform to the new central planning terrorist rules.

 

Chairman

Henri de Castries

Chairman and CEO, AXA Group

 

DEU Ackermann, Josef President of the Board of Directors, Zurich Insurance Group Ltd

GBR Agius, Marcus Chairman, Barclays plc

USA Altman, Roger C. Chairman, Evercore Partners Inc.

PRT Balsemão, Francisco Pinto President and CEO, IMPRESA; Former Prime Minister

FRA Baverez, Nicolas Partner, Gibson, Dunn & Crutcher LLP

ITA Bernabè, Franco Chairman and CEO, Telecom Italia

NOR Brandtzæg, Svein Richard President and CEO, Norsk Hydro ASA

ESP Cebrián, Juan Luis Chairman, PRISA

CAN Clark, W. Edmund President and CEO, TD Bank Group

GBR Clarke, Kenneth Member of Parliament, Lord Chancellor and Secretary of Justice

BEL Davignon, Etienne Minister of State

DEU Enders, Thomas CEO, EADS

DNK Federspiel, Ulrik Executive Vice President, Haldor Topsøe A/S

NLD Halberstadt, Victor Professor of Public Economics, Leiden University

USA Jacobs, Kenneth M. Chairman and CEO, Lazard

USA Johnson, James A. Vice Chairman, Perseus, LLC

GBR Kerr, John Independent Member, House of Lords

USA Kleinfeld, Klaus Chairman and CEO, Alcoa

TUR Koç, Mustafa V. Chairman, Koç Holding A.S.

USA Kravis, Marie-Josée Senior Fellow, Hudson Institute

USA Mathews, Jessica T. President, Carnegie Endowment for International Peace

USA Mundie, Craig J. Chief Research and Strategy Officer, Microsoft Corporation

DEU Nass, Matthias Chief International Correspondent, Die Zeit

FIN Ollila, Jorma Chairman, Royal Dutch Shell plc

USA Perle, Richard N. Resident Fellow, American Enterprise Institute

CAN Reisman, Heather CEO, Indigo Books & Music Inc.

AUT Scholten, Rudolf Member of the Board of Executive Directors, Oesterreichische Kontrollbank AG

IRL Sutherland, Peter D. Chairman, Goldman Sachs International

USA Thiel, Peter A. President, Clarium Capital / Thiel Capital

GRC Tsoukalis, Loukas President, ELIAMEP

CHE Vasella, Daniel L. Chairman, Novartis AG

SWE Wallenberg, Jacob Chairman, Investor AB

 

Member Advisory Group

USA David Rockefeller

http://www.bilderbergmeetings.org/governance.html

Sat, 09/15/2012 - 11:01 | 2798510 Clashfan
Clashfan's picture

Unable to hide? Typical CIA disinfo.

They have billions, black market, and bunkers. They have islands. They have yachts. They can hide just fine while your CIA buddies help them kill off the rest of us.

Sat, 09/15/2012 - 02:30 | 2798153 shutdown
shutdown's picture

 

$3,350 gold, huh? 

Okay, sure. That's like saying tomorrow it's going to be three o'clock. It'll pass by $3,350, then $4,450, and $5,550, and etc in the same way.

Sat, 09/15/2012 - 03:25 | 2798168 dariomilano
dariomilano's picture

are solely rising oil and gold?....

and sp500??.. oh that has already price in the QE!!?

Sat, 09/15/2012 - 12:54 | 2798702 Haager
Haager's picture

Good question. A year ago the markets tanked the week after the easing was announced. Also gold, silver, oil where brought down and it took to midst of November to have slight recoveries, then it dropped again the month up to christmas, before it rose again. This year there's an election coming, so I don't have a clue if "the market" will act the same way. Stocks turning lower on friday doesn't tell you everything and I don't know how much distraction the events in the middle east provides for another rollercoaster.

 

Sat, 09/15/2012 - 06:25 | 2798173 Floodmaster
Floodmaster's picture

This man work for the banks,collateral damage are secondary concern.

The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)

 

Since the peak of home values in June 2006, more than $9 trillion in values has come out of the housing market.

Sat, 09/15/2012 - 05:01 | 2798195 3rivers
3rivers's picture

Ben Bernanke knows what he is doing.  For instance take a look at the Fred chart CURRNS updated Sept. 14th. 

http://research.stlouisfed.org/fred2/series/CURRNS

It clearly shows us at the exact juncture where we need to go vertical.   

Sat, 09/15/2012 - 05:19 | 2798202 fijisailor
fijisailor's picture

Folks, the goal is rapid inflation to make all those bad securitized loans worthless.  Unemployment reduction is a liars excuse.  It doesn't matter to TPTB that we will all suffer in the process.  They'll cover their ass with more draconian security laws domestically.  Yes there is a motive for false flag embassy attacks.

Sat, 09/15/2012 - 07:53 | 2798275 indio007
indio007's picture

MUST .... REINFLATE..... REAL ESTATE.... BUBBLE...!!!!! GAAAHhhhhhhh!!!.....

Sat, 09/15/2012 - 08:00 | 2798278 bill1102inf
bill1102inf's picture

1000 gold and 40 oil. its all over but the crying

Sun, 09/23/2012 - 00:19 | 2821407 MeelionDollerBogus
MeelionDollerBogus's picture

Those prices you quote refer to an unrepeatable prior section of history. We'll talk about how nice it was when prices were that low but not one day in the future history of the entire earth will see those prices return. Ever.

Sat, 09/15/2012 - 08:58 | 2798317 d edwards
d edwards's picture

Read "Crisis by Design" by John Truman Wolfe.

Sat, 09/15/2012 - 09:06 | 2798327 Stuck on Zero
Stuck on Zero's picture

If the Fed buys $50 billion a month in mortgage securities what will the mortgage security holders do with all that cash?  Buy treasuries?  Buy AAPL? Gold?

 

Sat, 09/15/2012 - 10:02 | 2798415 lindaamick
lindaamick's picture

Most people including college educated upper income earning people have NO knowledge of the Fed, its history, its machinations including the ones be undertaken now.

The increase in gas prices, food and commodities will be met with puzzlement.

Pathetic.

Sat, 09/15/2012 - 10:06 | 2798421 CheapBastard
CheapBastard's picture

$190 crude is inevitab;e. There simply is too much currency of every type flooding the entire globe. Remember when crude was $14 and people said,"oil can never go to $100.00?"  That's up over 7x what people thought.

Well, now it is $100 and merely doubling to $200 is very likely. That's only 2x higher then now. We have already hit $147  two years ago.  So buckle up and prepare. For those who bought way out in the suburbs for a cheaper house thinking they would save money...it may be painful.

Sat, 09/15/2012 - 11:03 | 2798513 Clashfan
Clashfan's picture

Not if we work from home, live 2 miles from a grocery, and have farms all around us.

Sat, 09/15/2012 - 11:00 | 2798508 Elmer Fudd
Elmer Fudd's picture

FED assets?  You mean someone else's liabilities?  Paid for with digital credits (its NOT money) pushed out of a keyboard?

ARE YOU F*G KIDDING ME?  IS EVERYONE THAT F*G STOOPID? 

Sat, 09/15/2012 - 12:20 | 2798622 roadhazard
roadhazard's picture

So if the Bankers can keep unemployment high they will keep getting to unload there crap to the Fed for big bucks. God Bless America.

Sat, 09/15/2012 - 13:04 | 2798726 NewWorldOrange
NewWorldOrange's picture

"Cooperation - including support of passenger rail - is needed more than cooperation on anything else, including the vaunted "fiscal cliff.""

Yeah, cuz that whole "passenger rail" thingy is working out just great in California, isn't it?

As usual, your post is full of jibber-jabber that may be grammatically correct (you excel at that), but says absolutely nothing of substance. All those degrees you got in Feminist Gender Environmental Equality Justice Underwater Basket Weaving studies didn't leave any room in your head for the notion that what is sorely needed in America is not more central planning and management, but less.

   -- A Koch Bot (but you already knew that...BTW, WTF is a Koch bot?)

Sat, 09/15/2012 - 21:23 | 2799636 Venerability
Venerability's picture

My academic specialties were political science and American cultural history; I have three Ivy League degrees; and I worked in finance before you were born.

My credentials are very easy to verify. How about yours and/or your Botmaster's credentials?

None of the pseudo-academic specialities you mention were available when we Boomers went to school. And I am culturally fairly conservative.

I'm also a lifelong Republican.

The fact that none of the above resonates with you Fellas and that you make agreeing with Extreme Supply Side theory that verges on pure Nihilism the one and only criterion for acceptance in your world demonstrates just how narrow and Elitist that world has become.

 

Sun, 09/23/2012 - 00:16 | 2821403 MeelionDollerBogus
Sat, 09/15/2012 - 16:21 | 2799137 wezen
wezen's picture

I had a question that hopefully someone can answer about the details of QE.  If the fed buys bonds from the Treasury then who receives the interest on the bonds?  It seems like the fed balance sheet only reflects the bond principal.  If that is the case then does the Fed give the interest back to the Treasury (essentially creating interest free money)?  If this happens then QE would be fiscally stimulative at some point depending on what Treasury does with the interest.  The velocity of money could be increased at any point.  I'm not saying this is happening, just asking about the accounting. 

Sun, 09/16/2012 - 15:33 | 2801018 MeelionDollerBogus
MeelionDollerBogus's picture

Bernanke has in fact said the Fed reinvests the interest and the principal into new rounds of asset purchases so the Fed is the recipient as anyone else would be who is the holder of the bond (if it is paid at all)

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