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Deutsche On QE3, It's $800bn Or Bust!

Tyler Durden's picture


Buried deep in the 137 pages of Fixed Income 2012 Outlook, Deutsche's bond group looks at the implications of an extremely flat US Treasury Curve and implicitly low bond risk premium. Based on 5Y5Y rates relative to long-term growth and inflation expectations, tail inflation risks, and estimates of supply/demand shocks, the current bond risk premium are at levels that were witnessed ahead of the bond market sell-off of 1994, at the peak of the bond market conundrum of 2004-2006 and around QE announcements. This 100bps or so of 2s10s 'flatness' relative to real short rates and expected deficits also corroborates this risk premium. So what does this tell us? The extremely low risk premium fully captures QE expectations. Empirically, they find USD19bn of new QE tends to reduce real rates by 1bps and based on this and a model of fundamentals and risk aversion parameters, they find that Twist was fully priced in last September and since then the current dislocation suggests another full QE2-style package of about $800bn is already priced into the market (ex MBS reinvestment). We just hope the market is not disappointed.

Via Deutsche Bank's 2012 Fixed Income Outlook

A low risk premium

We estimate the risk-premium using two orthogonal techniques. The first technique consists of estimating a 5Y5Y bond risk premium by modeling the 5Y5Y rate relative to long term growth and inflation expectations (as per Consensus Economics), tail inflation risk (as captured by the skew in the SPF’s long-term inflation forecasts), and the correlation between growth and inflation (which captures the supply vs. demand shocks to the economy).


The graph below shows that the risk premium is currently particularly low and at levels that were witnessed ahead of the bond market sell-off of 1994, at the peak of the bond market conundrum of 2004-2006 and around QE announcements (see chart below).


The second technique consists of estimating the risk premium in the slope of the curve by modeling the UST 2s10s slope as a function of real short rates and expected deficits. This model corroborates the conclusion of the 5Y5Y risk premium model: the curve is too flat by about 100bp.

The low risk premium fully captures QE expectations

The low risk premium could be interpreted as the pricing of potential additional QE. We estimate the QE3 amount implied by the current level of 10Y real rates by modeling them as a function of the fundamentals (US economic surprise index) and risk aversion parameters (VIX and SovX WE).

Analyzing historically the reaction function of real rates to QE announcements, we find that USD19bn of new QE tend to reduce real rates by 1bp. Based on this estimate and on the model dislocation, we find that the 10Y real yield was fully pricing in Operation Twist in September and that since then the dislocation has increased to price in another full QE package, similar in size to QE2, of about USD800bn (excluding reinvestments of maturing agency and MBS holdings).


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Sun, 12/18/2011 - 08:31 | 1991109 GeneMarchbanks
GeneMarchbanks's picture

Since DB is a PD, I'm sure the Bernank will lend an ear. DB needs to be nationalized by the few sober Germans left as it seems now they are just nonsense merchants.

Sun, 12/18/2011 - 08:45 | 1991118 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

The way I see it is that Ben Bernake has played the economy like a master pianist, or like a master of the art of cunnilingus leaves a woman screaming in unbearable ecstacy. First he injects huge liquidity into the system to save the fragile banking sector and reignite a retail and housing boom. Of course by doing this it looked to the untrained eye as though he was sacrificing the dollar; yet these people are like poor chess players who can only think one or two moves ahead. Bernank is a grand master who saw the end game from the opening moves; problems in Japan and europe as well as a hard chinese landing, therefore the huge run towards US dollar and T bills as the ultimate safe haven. While people buying gold and silver have seen their life savings eroded. People should be thankful to his foresight and crafty maneuvering - in effect we've all been showered with free money from heaven!

Sun, 12/18/2011 - 09:11 | 1991171 unum mountaineer
unum mountaineer's picture

are you paul krugman  ?

Sun, 12/18/2011 - 16:24 | 1992054 AldousHuxley
AldousHuxley's picture

Too much TV brainwashing....Krugman is NOT your enemy. He is anti Phil Gramm, anti Greenspan, anti Erin Burnett, anti Hank Paulson, anti Obama. He may not be perfect and somewhat partisan, but they don't give Nobel prize (except peace) to corrupt elitists.


If there are 2 guys I'd blame for this crisis, it would be in order Alan Greenspan and Phil Gramm

5:00 mark


Back in 2008....

Obama doesn't have a clear plan to fix economy


Again in 2008...

On Hank Paulson's bank bailout..."cash for trash"

if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.


Back in 2006 on housing bubble...

If history is any guide, housing got a long way to fall, and the industry is going on a long drought

If you look at effect on consumers who have been using the house as ATM....You are looking at a hit to the economy, that is as big as  what happened to the stokc market in the 90s. gotta say it is in the range where serious slowdown is likely.....this is scary.

unemployment will rise above 6%...

most people have not seen any income gains



On Bush administration in 2003

There is no economic policy. That's really important to say. The general modus operandi of the Bushies is that they don't make policies to deal with problems. They use problems to justify things they wanted to do anyway. So there is no policy to deal with the lack of jobs.


On Fed and bubbles in 2002

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan would need to create a housing bubble to replace the Nasdaq bubble.


And Greenspan did exactly that....bubble after bubble...


Sun, 12/18/2011 - 16:57 | 1992110 r00t61
r00t61's picture

Sorry, but anyone who actively, openly, and publicly endorses inflation as a policy tool is the enemy.  Including Paul "Just let the aliens invade so that we can rebuild with a huge stimulus; broken window fallacy be damned" Krugman.

Sun, 12/18/2011 - 17:39 | 1992144 AldousHuxley
AldousHuxley's picture

hyperinflation is terrible, but 2% inflation is motivation on the super rich so that 3 generations of Paris Hiltons don't sit on their ass living off of Tbill dividends without having to care about allocation of their wealth into productive usage. It is only when Fed abuses that power and creates 5%+ inflation like they have. The complain against Fed is not the booms but bubbles. But Fed does so because elites are not letting Fed to be the only solution while they got their mouth open right at PDs before any working class can benefit.


Alien quote is taken out of context. He was mocking the general populace and DC's lack of understanding of how bad the economic fundamentals were. We had the buck break. sheer panic back in 2009. People were questioning the concept of money itself! He compared this to world war II stimulous. Basically the world is having huge demand problem that only alien invasion and world war would save the economy.......what do you think drones in Iran is all about? WAR = artificial demand stimulous.


What's needed is (1) money going to working middle class to stimulate demand (2) get the bad guys who are holding middle class hostage out. Krugman has the fundamentals right that working middle class needs a boost. What he has to communicate is how to achieve that without all the rewards going to the elites.

Currently with this supply side bullshit any time you print money it first goes to the bad guys: stockholders, banksters, then to CEOS.... and only trickles to workers if they are employed. How can you lower home prices without increasing employment? How can you prevent banksters million dollar bonuses without main street starving for capital? Answer: FISCAL POLICY....but politicians still are beholden to the billionares and dont' want to chagne fiscal policy...they are using FED's MONETARY policy to try to stimulate demand. Even Bernanke keeps pointing fingers at congress to do something instead of having his keep printing money. THE PROBLEM IS CONGRESS, especially the SENATE where shithole undereducated states are overrepresented. Even lower rating than Obama.


They got Mitt Romney (born on 3rd as son of CEO) ready to make sure FISCAL POLICY doesn't change so that workers work harder to increase productivity while wage gains remain flat. What do you expect when capital gains tax < working income tax? More money redistributed to capitalists versus workers and anytime Fed prints, they subsidize capitalist's risk while worker's income growth is eaten up by inflation. Well after 30 years, boomers are old, broke, and drowning in debt.


We all know who caused the problem and government has the power. BUt why don't they do anything about it? Becuase CONgress IS THE PROBLEM. Representative at least try to pass some bills, but they are all rejected by the senate. A lot less senators to bribe.



Sun, 12/18/2011 - 18:18 | 1992226 AldousHuxley
AldousHuxley's picture

on a separate note ...Krugman is not passing laws to make corporate personhood, elimination of your rights to due process (aka. habeas corpus) , etc. which Obama at least publically reprimended.


Detention under the law of war without trial until the end of the hostilities authorized by the Authorization for Use of Military Force.

93% of your senators voted for it....


Sun, 12/18/2011 - 21:30 | 1992627 r00t61
r00t61's picture

Krugman is just another Ivory-tower money-printing fanatic.  He's the worst kind of statist: "Your coercive central state theories are bad; however, mine are great, mostly because I have this PhD behind my name."

Krugman thinks that the economy is a big black box with levers on it; a tweak here, a tweak there, I am the supreme technocrat, coo-coo-ka-choo.  In real life, the economy is not rational, it's not deterministic, it's not even a chaotic system.  Krugman, like most mainstream economists, tries to pretend that his field is a hard science, like physics or chemistry, when it's little more than a social science, like psychology or sociology.

Krugman complained about Iraq when Bush was in town; strangely silent on criticizing Obama though.

I'm supposed to put up with endless inflation so that it prevents rich heirs and heiresses from getting to sit on their butts?  Guess what, dumbass, they already do sit on their butts.  The effect of inflation on rich people is the most miniscule of annoyances.  It's like having to kill an extra mosquito every summer.  Conversely, the effect of inflation on, say, fixed-income seniors, is them buying cat food in bulk and turning the heat off in the winter.  My God, you must be dense.  I wish ZH had the old karma system back so your ridiculous comments could get nuked into oblivion.

Sun, 12/18/2011 - 20:52 | 1992497 economics1996
economics1996's picture

If Krugman wants money to the middle classes then he should support ending the Federal Reserve.

Sun, 12/18/2011 - 23:17 | 1992866 Libertarian777
Libertarian777's picture

sorry 2% inflation? where'd you see that. Last I checked even official inflation was running north of 3.5%

Who gives a shit if Paris Hilton sits on her ass, a fool and their money are soon parted. Sure its nice to be born with a silver spoon, but there's a saying in Chinese that states wealth doesn't last past 3 generations (naturally there are exceptions but as a general rule it rings pretty true).

Inflation DESTROYS the lower/middle classes. At 4% inflation a year the value of your earnings is HALVED in 17 years. And inflation is running at 11%+ if you use the 1980 methodology of calculation ->; and remember how EVERYONE was complaining about high inflation in the late 70's early 80s. At 10% inflation in SEVEN years the value of your money is HALVED, and you wonder why the middle class can barely afford to send their kids to college?

So think about poor people, they struggle to get even a small increase in the minimum wage (I don't support minimum wage laws but that's another topic). If you're poor and you're earning minimum wage and can save just $1, if there was no inflation or better yet DEflation, then in 17 years time that $1 can buy you MORE than today, instead of your $1 being saved and earning NOTHING and buying you 50c in 17 years time.

Which of the two ways will help the poor people dig themselves out of poverty? inflation sure as fuck won't.

Sun, 12/18/2011 - 20:51 | 1992489 economics1996
economics1996's picture

Nobody pays attention to Krugman.  He's a nut case.

Sun, 12/18/2011 - 09:14 | 1991176 GeneMarchbanks
GeneMarchbanks's picture

That is some master trolling right there. Kudos. I especially enjoyed your opening sentence:

'The way I see it is that Ben Bernake has played the economy like a master pianist, or like a master of the art of cunnilingus leaves a woman screaming in unbearable ecstacy.'

Sadly for him, it is the desire of boys to please women, and not of men:

I'm sorry, it's just science...

Sun, 12/18/2011 - 09:59 | 1991222 hardcleareye
hardcleareye's picture

Depending on your view of the drug industry and the "unbiased data" used in the study,(are the results reproducable in other studies???) this could make the case that BOYS and man-boys should receive the Gardasil vaccine.

By the way a man worth keep is one who knows how to please his women......  

Sun, 12/18/2011 - 10:37 | 1991264 GeneMarchbanks
GeneMarchbanks's picture

Obviously you're a vagina owner, presumably somewhere in the so called 'developed' world which really just means a technology dominated society whose favorite pastime is consumption. Drug industry led and biased? Probably. My point remains. Arguably, no one is suffering more from present day conditions than women. And you really can't blame them. Men 'please' women simply by being men, and not by trying to 'please/pleasure' them. All this is lost on a society that worships infantilism. Bieber is the future.

Sun, 12/18/2011 - 11:01 | 1991347 falak pema
falak pema's picture

If you had to choose between a man with a hard dikk and a soft head vs a man with a hard head and a soft dikk which would you choose? I know what a man would like you to say, but a woman is such a mystery, she can make a man do anything with his head. But thats my experience ...she can even work miracles on soft appendices; that's what they say about women... your move.

Sun, 12/18/2011 - 09:21 | 1991185 Oh regional Indian
Oh regional Indian's picture

Gah! That cunnilingus visual was pointless and tasteless and probably has never happened. Yuck.

But it's none of these actors.

And QE3 is ongoing. It's called Operation twist.

Between interest rates, currency rates, pm rates and oil prices, it's advantage Moneymasters, every step of the way.

This system has to collapse. Even Jim Willie agrees with me. No way out. If you fight it, A Christopher Story awaits you , if you know what I mean.



Sun, 12/18/2011 - 10:00 | 1991218 jekyll island
jekyll island's picture

I agree ORI.  I consider Twist to be QE3, so next round of easing will be QE4, on our way to QE to infinity. 

Interesting Troll comment about Gold and Silver eroding savings, must be a momentum chaser, my position is still up over 100%, even after the recent manipulations. 

 Troll comment about deflation, and I am probably giving him too much credit, is accurate.  The credit bubble is deflating which does increase the purchasing power of the FRN$.  Do not know how long that will last, since QE is used to fight deflation and resulting bank runs.  So it is reasonable to have some cash to hedge this position, just need to be willing to pull the trigger to use it to buy real assets when they go on sale. 

Sun, 12/18/2011 - 11:52 | 1991464 J 457
J 457's picture

WTI dropping will become a set-up for additional easing.  But, if Congress somehow intervenes and blocks any QE efforts, silver and gold will drop.  Question is; when to buy more gold/silver?  I've been watching and waiting but fear we're still going to see another 10-15% drop before it turns up- and that rise predicated on more QE.

Sun, 12/18/2011 - 17:20 | 1992138 Western
Western's picture

"But, if Congress somehow intervenes and blocks any QE efforts, silver and gold will drop."


If you're implying gold and silver have been going up based on QE and QE expectations, you're wrong. They might drop because a few short term nancys may be missing out on an expected swing trade but that's it, I don't see them going down if there's no QE.

Sun, 12/18/2011 - 18:31 | 1992241 J 457
J 457's picture

I think gold and silver did go up based upon QE and fear of further inflation.  The other variable is a complete USD or EUR collapse, which if that happens then PM is the place to be. 

Sun, 12/18/2011 - 14:32 | 1991876 Sam Clemons
Sam Clemons's picture

I agree with the ORI on this.  I'm amazed at how the perception has become that we need to monetize debt (fancy way of saying let the government borrow and spend money into existence) is the solution.  We are reaching the evolution end game for fractional reserve banking, central banking, and fiat.

Sun, 12/18/2011 - 10:13 | 1991241 s2man
s2man's picture

What? My life savings were not eroded by investing in PMs.  I made 135% in silver and 40% in gold in the last two years.

Sun, 12/18/2011 - 23:21 | 1992895 Libertarian777
Libertarian777's picture

or as Ron Paul says, MONEY is a unit WEIGHT. It doesn't actually make sense to price it in FRNs, except for the fact that that is how the current financial system works.


Throughout history though money has always been a unit weight. Money substitutes (certificates) would denominate a unit weight. Ever wonder why the brits call their currency a 'pound' (weight) or 'sterling' (fineness), or how the 'dollar' (thaler) came about? they were all unit weight coins.

So technically in real money terms you've made 0% in the last 2 years.

Sun, 12/18/2011 - 10:57 | 1991337 Freewheelin Franklin
Freewheelin Franklin's picture



I was looking for the "[/sarcasm]" tag, but I didn't see it, so I "junked" you.

Sun, 12/18/2011 - 11:16 | 1991388 economics1996
economics1996's picture

Yo.u are full of shit.  Bernanke has had shit stains since 2006.  He is full of shit and his only playbook is Freidman and Schwartz.

Sun, 12/18/2011 - 12:41 | 1991578 CosmicBuddha
CosmicBuddha's picture

"in effect we've all been showered with free money from heaven!"


No, we have been hosed with unwanted monetary units from hell. You may like to have the fruits of your labour diluted to backstop the feckless and fraudulent, but I don't.

Sun, 12/18/2011 - 10:13 | 1991242 flight77
flight77's picture

Could you please explain the term "PD".

Sun, 12/18/2011 - 11:12 | 1991374 youLilQuantFuker
youLilQuantFuker's picture

Not important. All you need to know is DB is the Seal Team 6 of the global financial system.

Sun, 12/18/2011 - 11:14 | 1991381 GMadScientist
GMadScientist's picture

If you mean dead from a helicopter crash, then yes.

Sun, 12/18/2011 - 11:26 | 1991412 youLilQuantFuker
youLilQuantFuker's picture

Elite, best of the best. Able to score big behind enemy lines. Brings home the bacon. Fries it in the pan soldier! Ohrah!

Sun, 12/18/2011 - 11:41 | 1991451 GMadScientist
GMadScientist's picture

Able to freeze their balls off in cold water.

Gimme a nice comfy dry suit and nitrox tank any day. ;)


Sun, 12/18/2011 - 11:13 | 1991379 GMadScientist
GMadScientist's picture

Pusillanimous Douchebags

Sun, 12/18/2011 - 10:15 | 1991245 flight77
flight77's picture

What does the term "PD" means? Thanks for answering!

Sun, 12/18/2011 - 10:35 | 1991289 GeneMarchbanks
GeneMarchbanks's picture

You just said that in bold. PD refers to Primary Dealer status:

Sun, 12/18/2011 - 10:36 | 1991295 Global Hunter
Global Hunter's picture

bold and italics

Sun, 12/18/2011 - 12:19 | 1991525 Manthong
Manthong's picture

PD's are Peremptory Defalcators no matter what the Fed says.

Sun, 12/18/2011 - 10:35 | 1991290 Global Hunter
Global Hunter's picture

Primary Dealer

Sun, 12/18/2011 - 10:59 | 1991339 Freewheelin Franklin
Freewheelin Franklin's picture

Primary Douchebag

Sun, 12/18/2011 - 16:32 | 1992067 AldousHuxley
AldousHuxley's picture

PD = primary dealers


as opposed to retail banks like fifth third national bank of this and that who get money from PDs.


they get the FED cash fresh and hot off the printing presses


PD taken out like Lehman and MF Global is pretty significant event mass media doesn't want you to know.

Sun, 12/18/2011 - 08:26 | 1991111 Fips_OnTheSpot
Fips_OnTheSpot's picture

or else!

Sun, 12/18/2011 - 09:15 | 1991177 CORNGUY
CORNGUY's picture

Can any ZH'ers tell me where this is?   Maybe Im still drunk, but I couldn't figure it out.

Sun, 12/18/2011 - 10:31 | 1991281 youLilQuantFuker
youLilQuantFuker's picture

I'm pretty sure that's NYPD @ occupy jewyorkcity.

I could be wrong, but it looks to me like USSA.

Sun, 12/18/2011 - 11:10 | 1991369 Potemkin Villag...
Potemkin Village Idiot's picture

Looks to me like it's a training reel for how to treat anyone who posts "unapproved" links to blogs...

Part 2 is what they do to you in Gitmo...

Sun, 12/18/2011 - 11:12 | 1991375 scatterbrains
scatterbrains's picture

fk'ing disturbing..  How did google let this out ? Or is this going to reach epic distribution just before we launch into Syria ?

Sun, 12/18/2011 - 14:08 | 1991804 Philligan
Philligan's picture

That is Egypt and from this weekend

Sun, 12/18/2011 - 08:28 | 1991112 bullionbaron
bullionbaron's picture

In my opinion we'll see QE3 in 2012 and it will be the driver of the 3rd/bubble phase in the Gold bull market:

Sun, 12/18/2011 - 09:05 | 1991165 spiral_eyes
spiral_eyes's picture

there is only one real bubble, and that is benny's magical paper. gold was valuable a long time before 1913, and it will be valuable for a long time after the end of the fed.

Sun, 12/18/2011 - 10:23 | 1991266 s2man
s2man's picture

I read the article and agree, BB.  The bankers can not allow, or survive, debt cancellation or asset depreciation, upon which their loans are based.  So their choice is inflation.

Sun, 12/18/2011 - 11:44 | 1991455 WonderDawg
WonderDawg's picture

Sure, their choice is inflation over deflation. The question is, given the magnitude of the debt bubble that is imploding, can they keep it inflated? I personally think not, it is too massive and as it collapses will overwhelm their efforts and the bond markets will have the final say. So, will they get what they choose or will the markets decide what happens? Time will tell.

Sun, 12/18/2011 - 08:33 | 1991116 Everyman
Everyman's picture

And WHY do we "need" QE???   It hasn't done much other thatn bail out TBTFs, and gave the rest of us inflation.  There is PLENTY of "Liquidity" sloshng around.  What has started out as an "emergency funding" issue, has now turned into "every time the market gets a cold" we flood the market with money. 

Can someone PLEASE explain to me why QE is needed and by whom?

Sun, 12/18/2011 - 08:49 | 1991141 Perseid.Rocks
Perseid.Rocks's picture


You answered your own question. Any other questions?

Sun, 12/18/2011 - 11:23 | 1991404 Potemkin Villag...
Potemkin Village Idiot's picture

I think part of the process is an ongoing push towards monopolization... Bear Stearns, Wachovia, Countrywide, Merrill, WAMU, & of course Lehman & countless hedgies have already been picked apart (& the crap laid on the taxpayers)...

But there are still too many players... Next up will be C, BAC, and whatever they want to bury in Europe... In the end, it'll only be Goldman, JPM, & any other "Red Shielders" that make the cut... So the game, in the meantime & via Fed help will to facilitate the weakening of the "unchosen ones"... You can print up all the money in the process & it'll never circulate in the real economy...

Finally though... When it's all down to the last two standing... All those dollars in the system will get dumped right on the sheeps front lawn and a big bonfire will ensue...

By then, the "Red Shielders" will have confiscated most of the gold, and as well, they'll be the biggest landlords history of the planet by virtue of the most massive land grab the world has ever seen... 

Am I happy about it?... Um... NO!


Sun, 12/18/2011 - 08:54 | 1991146 sabra1
sabra1's picture

inflation is a non issue, for once all bank accounts are seized a la MFG, who cares the price of goods, as long as the crooks get air money!

Sun, 12/18/2011 - 08:55 | 1991149 Schmuck Raker
Schmuck Raker's picture

"Can someone PLEASE explain to me why QE is needed and by whom?"

I'll try.

Some possibilties:

  1. Bonuses; Bankers
  2. Campaign funds; Politicians
  3. Ferraris; Wal-Mart heirs
  4. Illusions; Plebes

Personally I'm hoping there's no QE until after I buy my plane ticket to SovereignMan Land (Guyana?).

Sun, 12/18/2011 - 09:01 | 1991159 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture to mention foodstamps, welfare, the public sector, baby boomer pensions...

just a few triffeling matters

Sun, 12/18/2011 - 09:22 | 1991186 Bobbyrib
Bobbyrib's picture

If the money from QE reached any of those groups, you would be correct. QE is for the bankers. Congress controls the food stamp progam, welfare, and public sector employee compensation. Only if both the Senate and House want to give the beneficiaries of the jobs, or programs will they keep receiving what they receive. As far as Baby Boomer Pensions are concerned if you are referring to the government's back of the pension system see above, if you mean the pension rise with the market please understand the market is rigged by the bankers so anyone else holding longer term gets slaughtered.

Sun, 12/18/2011 - 10:17 | 1991251 jekyll island
jekyll island's picture

Belize or Costa Rica

Sun, 12/18/2011 - 11:43 | 1991453 Schmuck Raker
Schmuck Raker's picture

Belize has better diving. Of course, there's always Honduras - the Original Banana Republic.

Sun, 12/18/2011 - 08:57 | 1991151 booboo
booboo's picture

"gets a cold" you mean like this:

Sun, 12/18/2011 - 10:32 | 1991285 johnu78
johnu78's picture

Forget the 800 billion, just bust!!!



Sun, 12/18/2011 - 10:40 | 1991305 Alex Kintner
Alex Kintner's picture

Seems obvious to me. With $15 Trillion in US debt, the G-Men need to use inflation to dissolve that into a trivial amount so it can be 'paid back'. Sucking the life blood out of savers and fixed income folks is a side effect that no one in govt cares about. And the elderly won't survive the winter living under bridges so it will have the added benefit of clearing away deadwood.

Sun, 12/18/2011 - 08:37 | 1991121 bank guy in Brussels
bank guy in Brussels's picture

« You really believe that QE to infinity is not coming? »

- Jim Sinclair, Mineset, 17 December 2011

Sun, 12/18/2011 - 09:10 | 1991169 Ted Baker
Ted Baker's picture


Sun, 12/18/2011 - 10:36 | 1991294 youLilQuantFuker
youLilQuantFuker's picture

And Ron Paul wants to inherit this mess?

Sun, 12/18/2011 - 09:22 | 1991187 Market Efficien...
Market Efficiency Romantic's picture

hopium market on cold turkey!

Sun, 12/18/2011 - 09:25 | 1991189 Bobbyrib
Bobbyrib's picture

The Germans are hoping that the US will print so the Euro will appreciate next year. Everyone knows the Germans love a strong currency. IMHO, the title of the article should be: 

Deutsche Keeps Hopes Up For QE3, It's $2 Trillion Or Bust!

Sun, 12/18/2011 - 09:34 | 1991201 Market Efficien...
Market Efficiency Romantic's picture

Deutsche and Germany are two totally disconnected concepts by now. Don't expect them to act as political PR for the government. The ties between the Merkel government and Deutsche are seriously damaged since Merkel asked them to buy EUR sov debt in 2010 and then announced a voluntary haircut on Greece. With Jain as the new CEO, Deutsche strategically positions more as a mix of JPM and HSBC. In 2012, Jain will quickly make sure to revert the recent politically caused focus on German retail banking, maintain the strong ibank business, but allocate more towards emerging Asian markets.

Sun, 12/18/2011 - 10:21 | 1991262 jekyll island
jekyll island's picture

Aren't the Rothschild's from Germany?  Deutschland can play it two ways, they love a strong currency but they are an export economy, so a weak Euro can benefit their industries too. 

Sun, 12/18/2011 - 09:25 | 1991190 flyonmywall
flyonmywall's picture

The market craves QE because it wants multiple orgasms. Sadly, Ben "The Disease" Bernake is a bankster academic gigolo, that has an STD called Fiat Money. He will use QE to bring the market off, repeately, but the Market Whore will fill up with fiat money and eventually die a horrible, pus filled death, while still in the throes of ecstasy.

Those who have the gold condoms will win, unless the JBT in leather gear get them first.


Sun, 12/18/2011 - 09:37 | 1991204 Market Efficien...
Market Efficiency Romantic's picture

... and Bernanke knows, a new rep administration would overthrow him shortly, so he will make sure, the hopium daze reaches its climax shortly before election date and wins Obama a 2nd term.

Sun, 12/18/2011 - 11:29 | 1991425 Potemkin Villag...
Potemkin Village Idiot's picture

I'll vaguely go along with the election cycle "timing" dynamic, but as for this...

... and Bernanke knows, a new rep administration would overthrow him shortly

What makes you so sure that the GOP (save for maybe Ron Paul), would throw him out...

look the the "timing" of Jeckly Island & the election of Woodrow Wilson for clues...


Sun, 12/18/2011 - 12:27 | 1991545 Bobbyrib
Bobbyrib's picture

How would QE win Obama a second term? The public knows by now that QE does nothing to enhance our economy.

Sun, 12/18/2011 - 09:44 | 1991210 PulauHantu29
PulauHantu29's picture

$800 Billion is a good step toward $8 Trillion

Sun, 12/18/2011 - 11:18 | 1991393 GMadScientist
GMadScientist's picture

Maybe they can put some green shoots and a recovery on lay-away.

Sun, 12/18/2011 - 10:19 | 1991255 Sudden Debt
Sudden Debt's picture

It's still less than the US deficit.

Half of it actually....

To keep the gravy train going they'd better raise that to 1.5 trillion a year.


Sun, 12/18/2011 - 11:53 | 1991473 disabledvet
disabledvet's picture

Peanuts compared to "Europe." and that of course is where QE is going to happen. Indeed "it has happened already" as yields plunge dramatically and the Continent careens towards something that could make the Great Depression look like a picnic.

Sun, 12/18/2011 - 12:07 | 1991498 Market Efficien...
Market Efficiency Romantic's picture

make that an exponential raise every year to suffice the growth paradigm of the real economy

Sun, 12/18/2011 - 10:38 | 1991298 kito
kito's picture

For all those qe wishers:
The press is printing, are you listening...
In fort knox, the gold is glistening..
What a beautiful sight...
To see the m2 supply take to flight...
Walkin in hyperinflationland.....

Sun, 12/18/2011 - 10:39 | 1991301 steve from virginia
steve from virginia's picture

What nonsense, no wonder the Europeans are in trouble, they wouldn't recognize Tuesday on a Monday.

German: yes, the Bundesbank can conduct open market operations on the German national account and will do so when its big banks such as Commerzbank and Deutschebank unravel. Hey guess what? So can the Federal Reserve! It can come up with as many dollars as it likes on demand unlike th numbskull Europeans who have nostalgia for the early 1930s.

German: what does capital flight from Eurolandia represent: QE3-4 and 5. There is so much cash a) buying dollars and b) looking for a place to hide the Treasury doesn't have enough product to sell! This is with the US government running a $1.5 trillion deficit! Add capital flight in dollars from China and you have QE6-7 and 8. Foreign exchange works.

American: the establishment's beat-down on the busted-out poor is bad for domestic business but good if one wishes to become a 'safe haven' for pampered overseas millionaires. Oops! Fly in that particular ointment: MF Global's collapse puts millionaires' collateral at risk.

Well, the government won't steal German money tomorrow: forget about more easing, it is unnecessary.

Sun, 12/18/2011 - 10:56 | 1991335 Dick Darlington
Dick Darlington's picture

Hello, my name is Deutsche Bank and i'm insolvent.

Sun, 12/18/2011 - 11:19 | 1991397 GMadScientist
GMadScientist's picture

And, before I knew it, I was buyin' MBS in the morning and buyin' more in the afternoon.

Sun, 12/18/2011 - 11:01 | 1991350 LookingWithAmazement
LookingWithAmazement's picture

"the current dislocation suggests another full QE2-style package of about $800bn is already priced into the market"

So gold and silver will not rise again.

Sun, 12/18/2011 - 11:02 | 1991351 dcb
dcb's picture

fuck these assholes. sorry for the language but this analysis is right out of the propaganda room, and it's just wrong. QE makes yeilds rise we have seen it happen over and over. It's the bernenke logic Qe lowers yeilds, but they in fact rise when he does it. sorry bue those who buy this. stop qe yeilds drop, start qe yeilds rise. only some kind of fool or an economists caould rationalize that qe does what it is "inteneded" to. No the purpose of Qe is to drive up the maket raise asset prices, bail8i out bankers and rich people. that simple.

Sun, 12/18/2011 - 11:07 | 1991360 Boston
Boston's picture

Here's the Treasury and risk trade....again:


1. When QE gets announced, SHORT the 10-year. Get long risk.

2. When QE nears its end, LONG the 10-year. Go short risk.

For all of the above, use technicals for timing.


This is becoming routine. It worked like a charm for QE1 and QE2. It will work again with QE3.

Sun, 12/18/2011 - 11:07 | 1991362 Nacho Libre III
Nacho Libre III's picture

The U.S. economic numbers are just too sexy. No qe whatever. The beard trimmer in chief has no cover to announce such a program. Besides, if all the other incarnations of qe didnt succeed in killing the usd, there's no way in hell that a piss ant $800B will do the job, so why even take the heat for trying. Probably wouldn't even get the usd to test recent lows in the current liquidity environment.

Sun, 12/18/2011 - 11:14 | 1991382 Everybodys All ...
Everybodys All American's picture

Rates are already at historic lows. Operation twist is essentially QE infinity. What effect would any other QE program actually have when operation twist is already in place along with rates set at near zero for two more years?

QE has shown itself to have limited success since it's inception. In fact the averge American would say it has had absolutely no success. We find ourselves deeper in debt and the Federal Reserve has been more than accomodating along the way. No one in their right mind would consider anything the Fed has done to be even mildly successful at reducing unemployment which just so happens to be one of their mandates.

With that as the back drop how can Bernanke "sell" this to the American people. IMO it will take a crisis, otherwise don't look for it. The crisis could come in any form but that is likely what it will take.

Sun, 12/18/2011 - 12:11 | 1991505 Eally Ucked
Eally Ucked's picture

It's simple everybody's buing US bonds in expectation of QE (is there any other rationale behind it?), if they stop buing it because they lose QE dream for some reason, then you'll see BB coming to the market big time.

Average American is not important, gov is and it needs funding for huge deficit, isn't it? If there's no QE all those buyers can buy Euro bonds with higher yields and probably in short term similar possibility for currency collapse.

Sun, 12/18/2011 - 18:58 | 1992269 Everybodys All ...
Everybodys All American's picture

The buying of US bonds is in part because of the fear of the Euro collapse. The threat of more QE in my view has very little to do with the recent rising Treasury market. The dollar and treasury's strength is highly corollated to Euro weakness. Ask yourself this question. If you could lend someone money would you rather be paid back in dollars or in euros. No one is answering euros.

Agreed that according to the Fed the avg American is unimportant but that veil has been lifted and it may not be given much choice but to stand down. Why would anyone buy Euro bonds in Euro currency knowing the currency itself is losing value and is not likely to offset the higher yield? Hence the trade for US dollar and treasury's remain strong.

Sun, 12/18/2011 - 19:20 | 1992309 Eally Ucked
Eally Ucked's picture

I dare to disagree, ECB has not printed yet as expected so everybody moves to better chance for QE, hence Euro drop but at first hint from the FED that they won't print we will see Eur/USD back at 1.4. They play that game for quite sometime. 

Sun, 12/18/2011 - 20:43 | 1992451 Everybodys All ...
Everybodys All American's picture

How do you reconcile that the Fed head Bernake said he would not rescue Europe? The EU is not governed by a Federalist system and therefore needs authority granted from all the sovereigns. It has so far not been granted and therefore printing is unlikely. That is not to say stealth saves are not occuring. For a nut job cornered will likely do whatever they can to save their power. Germany is so far not willing to print and is very cognizant of their Weimar Republic past. What may be the next best choice might just very well be Euro bonds issued in US dollars. That would then directly commpete with US Treasury sales. How likely is that?

Sun, 12/18/2011 - 21:45 | 1992644 Eally Ucked
Eally Ucked's picture

BB won't help Europe he has to help himself.Europe won't print for now but wait few months after FED goes easy because if he won't they will not buy US bonds anymore and $ will go down. And so on and on and on. Linking 2 death cats won't make money for big players so they will favour anything they think will be much more profitable, for now its hard to say what kind of fashion they will promote.

Sun, 12/18/2011 - 11:22 | 1991402 GMadScientist
GMadScientist's picture

We won't see QE3 until S&P 1050 or WTI 80.

Know this.

Sun, 12/18/2011 - 11:28 | 1991423 kito
kito's picture

Im thinking wti 70 for ben to have the green light. Oil is the thorn in his side

Sun, 12/18/2011 - 11:36 | 1991441 GMadScientist
GMadScientist's picture

I don't think they have "the fear" of inflation that they did even 6 months ago...too many headwinds from Zooropa and the landing-gear-free Chinee rushing at the tarmacadam.

Sun, 12/18/2011 - 11:35 | 1991439 youLilQuantFuker
youLilQuantFuker's picture

My indicators, one being DBA, are brightly flashing stagflation with a splash of deflation.

Sun, 12/18/2011 - 11:38 | 1991445 GMadScientist
GMadScientist's picture

Sure...sector preferences will be stark.

The haves and have-nots become the must-haves and the well-maybe-next-times.

Sun, 12/18/2011 - 11:28 | 1991424 Atomizer
Atomizer's picture

Deutsche's bond group experiencing an insolvent tone burst.


Hurry up & feed us, we're on life support. We beg you to help us.. We don't want to die.. (To set the drama, tears and sobbing begins)

Sun, 12/18/2011 - 11:39 | 1991449 GMadScientist
GMadScientist's picture

Pay-per-view, bitchez.

Sun, 12/18/2011 - 12:08 | 1991499 grid-b-gone
grid-b-gone's picture

Recoveries are expensive! If we pay a little more, can we afford a better one?

We're renting this one to keep the cost down, but hope to own one outright someday.

Sun, 12/18/2011 - 13:50 | 1991763 Rodolfito
Rodolfito's picture

Here is Jim Rickards on printing:

“Well, you see the Treasury shorting the dollar in the form of taking SDR notes. You see printing in order to get the dollar back down against the euro. You see more printing to break the peg if China chooses to repeg, which I believe they will. And, of course, the IMF has its own printing press to print SDRs.” Also, Notional GDP targeting, which means that the Fed is going to pick a target for growth in NGDP and then print as much as it takes to hit that target."

Sun, 12/18/2011 - 14:20 | 1991847 Snakeeyes
Snakeeyes's picture

The Yield Curve isn't signaling recession or a Fed intervention with more QE. But as Clouseau said in "Revenge of the Pink Panther." "But these aren't normal times, Cato." QE3? The Message From The Yield Curve is No – “But these aren’t normal times, Cato”

Sun, 12/18/2011 - 14:34 | 1991881 slewie the pi-rat
slewie the pi-rat's picture

Empirically, they find USD19bn of new QE tends to reduce real rates by 1bps and based on this and a model of fundamentals and risk aversion parameters, they find that Twist was fully priced in last September and since then the current dislocation suggests another full QE2-style package of about $800bn is already priced into the market (ex MBS reinvestment). We just hope the market is not disappointed.

i think i'm in an elvish mood

this made me laugh

HoHoHo  ELVISh BlueChristmas

Sun, 12/18/2011 - 14:40 | 1991894 Bill Shockley
Bill Shockley's picture

Look at the big picture please.

It's no longer us against them.

We are in it togetherand the politicos realize that better than you do, after all they eat at the same table.


The currencies will combine.

The Saudis will do as they are told(by the king).

The Chinese and the Indians were never needed and still aren't.

Russia has decided to go with Europe(as if they ever really had a choice)(Putin understands)(KGB-CIA).

The masses get heroin and coke.

Price your gold in Eunatos if you can.

Guns and gold forever(food and used cars).

Get ready for the fight, plant a garden.

Read 'A Tale of Two Cities" and '1984'.

Save a few seeds.


Sun, 12/18/2011 - 16:05 | 1992027 crooklyncat
crooklyncat's picture


This lawsuit was filed the other day and IT EXPLAINS EVERYTHING!!!!!! PLEASE READ AND SPREAD FAR AND WIDE.



Sun, 12/18/2011 - 16:47 | 1992093 Rodolfito
Rodolfito's picture

Once they do get on with the massive printing and once, eventually, the dollar hyperinflates (assuming it does) and the global financial system collapses, does this mean that most other world currencies backed by the same fresh air that backs the dollar will also hyperinflate? Or could they survive indefinitely after that?

Can anyone help me with this? I have been searching for an answer to that for a long time.


Tue, 12/20/2011 - 01:02 | 1996742 ThrivingAdmistC...
ThrivingAdmistCollapse's picture

Wow that is a huge round of QE.  With so much money printing, I fear that the entire world might suffer an economic collapse pretty soon.

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