Did Ben Unleash The "New" QE? Not So Fast Says JP Morgan

Tyler Durden's picture


Earlier we presented the view by one of the TBAC's co-chairmen, Goldman Sachs, former employer of such NY Fed presidents as Bull Dudley. Now we present the only other view that matters - that of Fed boss (recall the JPM dividend announcement and how Jamie Dimon pushed Ben B around like a windsock) JP Morgan, and specifically chief economist Michael Feroli who is a little less sanguine than the market about interpreting Bernanke's promise to always support stocks, using the traditional stock vs flow obfuscations which is about as irrelevant as they come. To wit " How one views the word "continued" in this context depends in part on whether it is the stock (or total announced amount) of asset purchases that matter for financial conditions, or whether it is the monthly or weekly flow of those purchases.... according to the stock effect view the end of Twist purchases in June does not amount to a tightening, but rather is a continuation of the current accommodative stance of monetary policy. Thus, "continued accommodative policies" for a stock effect adherent would not necessarily imply an extension of asset purchases beyond June." That said, all of this is semantics. Recall that the US has $1.4 trillion in debt issuance each and every year. Unless the Fed steps in to buy at least a material portion, this debt will never be parked, rendering all other plot lines, narratives and justifications for QE moot.

From JPM

This morning Fed Chair Bernanke delivered his most in-depth remarks on the labor market in quite some time. The main upshot seemed to be that while there has been a lot of enthusiasm recently about the improving job market, Bernanke remains unimpressed with the recent labor market data, and is unconvinced that we can confidently project ongoing improvement in the unemployment situation. The policy implication was dovish, as Bernanke diagnosed weak aggregate demand as the cause for the problems in the job market, and thus continued accommodative monetary policy has a role to play in supporting further reductions in unemployment. We do not judge the speech as so dovish as to now expect QE3, but we do think it serves as a reminder that it probably wouldn't take much of a deterioration in the labor market -- i.e. a rise in the unemployment rate -- to induce the Fed to initiate another round of asset purchases. We think the more relevant policy message from today's speech is that it is premature to believe that Fed leadership is even considering tinkering with the late 2014 rate guidance. In the past few years the Fed was sometimes quicker to embrace improving data. This time, however, Bernanke seems to view labor market normalization as a marathon rather than a sprint, and is taking a more patient view in processing signs of an improving job market.


Regarding the labor market, the Fed Chair began his talk with a review of the recent data, while reminding the listener how far from normal many job indicators remain. In viewing the recent improvement in job growth, Bernanke cautioned that the flows data indicate that the recent advance owes more to a decline in layoffs rather than to a pickup in hiring, and that to achieve more rapid job gains we'll need to see hiring accelerate. Bernanke then addressed the issue of the unemployment rate undershoot relative to what Okun's law predicts (a topic we have addressed at several points, see "Okun is broken," and "What's Okun been smokin'?"). Bernanke was not enthusiastic about the view that the puzzle is best explained by either declining participation rates or mismeasured output. Instead, he saw the most persuasive explanation as "catch up" for the period in '08 and '09 when the rise in the unemployment rate was greater than what would be expected, and we are now seeing "the flip side of the fear-driven layoffs that occurred during the worst part of the recession." Bernanke concluded from this that we are now back to a normal GDP-unemployment configuration, and so going forward faster growth will be required to see further declines in the unemployment rate. Finally, Bernanke addressed the issue of long-term and structural unemployment and reiterated the conclusion of the center of the FOMC: "at most, a modest portion of the recent sharp increase in long-term unemployment is due to persistent structural factors."


Given that unemployment is more due to cyclical rather than structural factors, there remains a role for countercyclical policy in supporting the job market. In particular, strong final demand growth "can be supported by continued accommodative policies." How one views the word "continued" in this context depends in part on whether it is the stock (or total announced amount) of asset purchases that matter for financial conditions, or whether it is the monthly or weekly flow of those purchases. Most at the Fed ascribe to the stock effect view, and thus the last easing -- at least from a balance sheet perspective -- took place last September when Twist was announced. In addition, according to the stock effect view the end of Twist purchases in June does not amount to a tightening, but rather is a continuation of the current accommodative stance of monetary policy. Thus, "continued accommodative policies" for a stock effect adherent would not necessarily imply an extension of asset purchases beyond June.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 03/26/2012 - 12:16 | 2291313 Hippocratic Oaf
Hippocratic Oaf's picture

And you believe JPM?

Mon, 03/26/2012 - 12:17 | 2291320 Mark Carney
Mark Carney's picture

I think it is pretty clear that Bernak reads ZH.  I mean, is it coincidence that this weekend ZH posted that the FED is last in the race to debase?  The Bernak never looses.


Challenge accepted.

Mon, 03/26/2012 - 12:21 | 2291330 LawsofPhysics
LawsofPhysics's picture

yep, besides, ZIRP is QE!  Unless of course you don't believe there is a very real cost for creating capital without adding any real value to the system.

Mon, 03/26/2012 - 13:08 | 2291524 kito
kito's picture

Zirp is not qe. As todays pm moves clearly demostrate. Gold is bored with zirp, wake it when ben prints and the money supply charts actually start increasing again....until then enjoy the short lived pm pop based on promises of qe that won't lead to anything this year.....don't hold your breath for the engagement ring this year.....maybe he will propose to you next year though.....

Mon, 03/26/2012 - 13:12 | 2291548 Spider
Spider's picture

"Quick guys lets issue a meaningless statement to try to push that silver price back down ... damn Bernanke!"

-JPM Silver Short desk

Mon, 03/26/2012 - 13:28 | 2291615 kito
kito's picture

Quit smoking the hopium.....

Mon, 03/26/2012 - 13:37 | 2291637 LawsofPhysics
LawsofPhysics's picture

Ignoring the very real cost associated with creating capital without adding anything of real value does not make it go away.  If anyone is smoking, that would be you sir.  Gold is not money, it is however, a store of wealth that has minimal counterparty risk.  You speak of money supply not going up?  What fucking rock did you just crawl out from under?  Go to the Fed's own website and see for yourself.  Just because that capital is being mis-allocated and mal-invested, does not mean it isn't there and won't come flooding into the real economy (especially should the dollar no longer be a reserve currency).

Mon, 03/26/2012 - 16:27 | 2292296 kito
kito's picture

from an article in the telegraph:

Data collected by Simon Ward at Henderson Global Investors shows that M1 money supply growth in the big G7 economies and leading E7 emerging powers buckled over the winter.


The gauge - known as six-month real narrow money - peaked at 5.1pc in November. It dropped to 3.6pc in January, and to 2.1pc in February.


This is comparable to falls seen in mid-2008 in the months leading up to the Great Recession, and which caught central banks so badly off guard.




"The speed of the drop-off is worrying. This acts with a six months lag time so we can expect global growth to peak in May. There may be a sharp slowdown in the second half," said Mr Ward.


Mon, 03/26/2012 - 13:56 | 2291738 TeresaE
TeresaE's picture

Mark, did you catch the whole part about Okun's Law being "broken?"

It was obvious that he, or a toadie with pull, read ZH. 

I so enjoyed the article concerning Okun's Law, apparently it moved the Federal Reserve too.

Mon, 03/26/2012 - 12:21 | 2291333 Sudden Debt
Sudden Debt's picture

You know... It's not really patriotic to go against the word of the overloards of America.

Mon, 03/26/2012 - 12:32 | 2291366 Eireann go Brach
Eireann go Brach's picture

We love Jamie D!

Mon, 03/26/2012 - 13:04 | 2291503 Silver Bug
Silver Bug's picture

QE to infinity is here to stay, no matter what nonsense you hear from these guys. They have no choice.



Mon, 03/26/2012 - 13:19 | 2291578 sampo
sampo's picture

And you believe JPM?


They're just talking their book while sinking with their silver short.

Mon, 03/26/2012 - 13:56 | 2291740 Jake88
Jake88's picture

Yes.  I like to believe that sanity will ultimately prevail. If you would rather believe that the Fed is going to continue ad nauseum with remedies that do not work and that will send us into hyperinflation then go ahead just BTFD.  You should also be looking for a farm way out in the boonies to survive out the coming apocalypse.

Mon, 03/26/2012 - 12:16 | 2291316 spiral_eyes
spiral_eyes's picture

Ben, the two of us need look no more

You print money and we watch gold soar!

Mon, 03/26/2012 - 12:18 | 2291322 LawsofPhysics
LawsofPhysics's picture

More "good cop, bad cop" when all parties involved are in fact bad.  All I hear are paper-pushers starting to stink of fear and desparation.

Mon, 03/26/2012 - 12:38 | 2291397 tickhound
tickhound's picture

So strong is the power of the 'dangled carrot'... As it moves the mule around and around and around.

Mon, 03/26/2012 - 12:52 | 2291462 Amish Hacker
Amish Hacker's picture

It's not the carrot you have to worry about. It's the stick.

Mon, 03/26/2012 - 12:18 | 2291323 Marge N. Callz
Marge N. Callz's picture

So when does the market start pricing in QE4?

Mon, 03/26/2012 - 12:22 | 2291337 Sudden Debt
Sudden Debt's picture

When the dollar goes to 20

Mon, 03/26/2012 - 12:29 | 2291364 francis_sawyer
francis_sawyer's picture

last November

Mon, 03/26/2012 - 12:26 | 2291348 tekhneek
tekhneek's picture

Damn muppets.

Mon, 03/26/2012 - 12:26 | 2291354 Ted Baker
Ted Baker's picture


Mon, 03/26/2012 - 12:27 | 2291357 Assetman
Assetman's picture

That said, all of this is semantics. Recall that the US has $1.4 trillion in debt issuance each and every year. Unless the Fed steps in to buy at least a material portion, this debt will never be parked, rendering all other plot lines, narratives and justifications for QE moot.


And that's all that really matters-- keeping the cost of US goverment debt as low as entirely possible.

Because the consequences otherwise is unfathomable.

Mon, 03/26/2012 - 17:18 | 2292451 mendigo
mendigo's picture

Yes it may not be so much about monetary policy as it is about keeping lights on in the capital building or is that covered in solar panels now - well say idea.

Mon, 03/26/2012 - 12:27 | 2291359 ekm
ekm's picture

Now that Benny B publickly accepted that he is experimenting and he was forced (by whom?) to just do something, the only thing remaining is a margin call for a Primary Dealer (that's who).

Who will be MFGlobablized next? Merryll Lynch?

Minimum 1000 pts dow drop in one day, once that margin call occurs.

Mon, 03/26/2012 - 12:28 | 2291361 Comay Mierda
Comay Mierda's picture

SPX on its way to 1480 at least. Dont take that as an indicator of an "improving" economy. thats just what the technicals are screaming to me

Mon, 03/26/2012 - 12:40 | 2291409 LawsofPhysics
LawsofPhysics's picture

I believe if you look at every hyperdeflationary collapse or real sovereign default, you will see markets going to the moon just prior to the total collapse and implementation of real capital controls and price fixing.

Mon, 03/26/2012 - 15:51 | 2292142 ffart
ffart's picture

What is this "hyperdeflationary collapse" you speak of. When things no longer become affordable for people, the culprit is not deflation.

Mon, 03/26/2012 - 12:29 | 2291365 ObungaBoy
ObungaBoy's picture

GS said QE3 will be “unleashed” Apr.2012 – GS rules U.S. so QE3 is ironclad sure stuff

Mon, 03/26/2012 - 12:40 | 2291407 Quinvarius
Quinvarius's picture

Man, they must be getting raped going into metals OPEX.

Mon, 03/26/2012 - 12:41 | 2291412 crawldaddy
crawldaddy's picture

when the market relies on grammar tense from a central bank stooge, isnt that all you need to know to get your savings out of this racket? I mean if you want to trade and gamble on banker gimicks and word play then enjoy the market, if you want to invest in companies based on fundementals, well that ship has sailed.


Mon, 03/26/2012 - 12:42 | 2291416 ItsDanger
ItsDanger's picture

These guys need to learn that even if more QE is coming, it doesnt mean shit anymore in terms of providing any economic boost.  Just gives the boys more opportunity to unload crap to the Fed maybe.  But doesnt help the economy at all, in fact, it should viewed as a negative at this stage.

Mon, 03/26/2012 - 13:07 | 2291438 q99x2
q99x2's picture

I heard the future laughing this article is so funny.

Throw the books out they are meaningless. They don't even connect from balance sheet to balance sheet let alone from central bank to central bank or from one year to the next. It is too complicated and nobody understands the numbers and No body cares any more. Look right before the Bernank got up from his chair he laid a fat finger down and that is how it now works - And it is so much easier than all that nonsense and shenanigans with the freakin numbers.

Mon, 03/26/2012 - 12:53 | 2291466 i_fly_me
i_fly_me's picture

Does anyone really believe that the annual debt issuance will stay 1.4T (or less) going forward?

Mon, 03/26/2012 - 12:56 | 2291476 nobusiness
nobusiness's picture

Morgan Traders missed the rally this morning and need a better entry point.  So out come the stories.

Mon, 03/26/2012 - 13:41 | 2291678 Quinvarius
Quinvarius's picture

They got straight up reburied while doing their morning walkdown to the previous close.

Mon, 03/26/2012 - 12:57 | 2291479 Dorky
Dorky's picture

How one views the word "continued" in this context depends in part on whether it is the stock (or total announced amount) of asset purchases that matter for financial conditions, or whether it is the monthly or weekly flow of those purchases.

Whether it is this or that, it is still QE. And there will be more QEs to buy up private debts like corporate bonds, in the future.

Mon, 03/26/2012 - 12:59 | 2291489 LawsofPhysics
LawsofPhysics's picture

Precisely, capitalism died the day shareholders and corporate leadership were no longer on the hook to pay back private debt the company had defaulted on.  Now everyone simply gets a bailout.

Mon, 03/26/2012 - 13:03 | 2291501 yogibear
yogibear's picture

Ben Bernanke and the Federal Reserve doves no longer care about the integrity of the US dollar. They will just keep on encouraging more and more debt until the loss in confidence of the curreny occurs. Their on the Zimbabwe economic policy plan.

Try to keep inflating asset prices while you pile on debt, trigger inflation (the fed wants this) and devalue the currency. 

Mon, 03/26/2012 - 13:05 | 2291506 gimli
gimli's picture

I heard Blythe Masters was feeling so much pressure, one of her boobs popped

Mon, 03/26/2012 - 13:08 | 2291526 Confundido
Confundido's picture

Wait! Is JPM not the one shorting silver lately?

Mon, 03/26/2012 - 13:09 | 2291535 walküre
walküre's picture

Just so we're clear.

While our President is out there playing the race card (Trayvon), Ben is speaking to Americans about the economy and what his intentions are to improve the economy.

If this is not a clear case for our sad state of a bank owned central planning committee where investors are mere muppets and politicians are puppets, I don't know what is.

Now, folks they won't tell you this on "Good Morning America" but it sure is true.

Bernanke is the master of financial propaganda. There had to be something amiss over the weekend for the Benster to come out on a Monday morning and spin the QE wheel anew. QE is the buzz again this week and maybe next. It was reported weeks ago that the Benster might consider announcing a 3.6 US Dollars (NOT Zimbabwe Dollars) trillion QE program.

Reeks of desperation. If it flies and the financial world order will not collapse as result, they are one very lucky bunch of scammers. I doubt it though. This is 4 years into a global financial crisis where the US hasn't seen any major improvements in her economy and Europe as well as China are just muddling through or contracting.

I don't know what day in history exactly determined the fate of the Weimar Republic but I'm sure that the day when the Benster ever announces a 3.6 trillion US Dollar debt buying program will be the day that all the world will notice the gig is up.

Mon, 03/26/2012 - 13:13 | 2291551 Tsar Pointless
Tsar Pointless's picture

Rumor has it that rumors of further impending QE will make the equity markets move higher.

Some pointless rumormonger told me that.

Mon, 03/26/2012 - 13:20 | 2291581 stirners_ghost
stirners_ghost's picture

The value of your currency (by decree) is influenced by the interpretation of "continued" as uttered by an old bald guy who has never had a real job. No fragility here, carry on.

Mon, 03/26/2012 - 13:28 | 2291608 ekm
ekm's picture

Crude oil is going negative. It seems that Benny is no longer believable.

Even MSM is saying out loud that he is becoming irrelevant.


Mon, 03/26/2012 - 13:47 | 2291709 Quinvarius
Quinvarius's picture

Emperor of the gold standard to Bernanke:

"You want this, don't you? The hate is swelling in you now. Take your trustworthy dollar weapon. Use it. I am unarmed. Strike me down with it. Give in to your anger. With each passing moment you make yourself more my servant."

Mon, 03/26/2012 - 14:05 | 2291778 ekm
ekm's picture


Mon, 03/26/2012 - 14:11 | 2291798 slewie the pi-rat
slewie the pi-rat's picture

nothing new at all today, imo

he'll print if and when he needs to

he's got things screwed down pretty tight, hasn't he?  and the system is stil together and sputtering along, still broken from the last bankster-pol crimewave and probably 5-10 years before any real economic engine can power up, at least in the US

if ya do the crime ya gotta do the time in economics, too, BiCheZ!

if ya break your leg, ya gotta slow down long enuf for it to heal

with the housing crime scene just a fuking bloodbath and the manufacturing thefts over the last 20 years, even with most enlightened goobermint policies, this would take a long time to recover from

with the fuktards we keep electing, it may take forever, or damned close to it

cronyism is the problem, not the solution

unfortunately, this doesn't get too much coverge from the FED, does it?

so he can try to jaw-bone "confidence" till he's blue as papaSmurf, and he'll get a "response" simply b/c the system hasn't failed, completely; but the only "magic" for the sick and wounded is time + the proper care

not time + pretense

while the banksters are pretty good at buying time, the political sphere, blinded by keynesianism and owned by its "church and practitioners" and with the brain tumor of "growing the economy by centralPlanningTM" may just hafta die, unfortunately, if it is truly as incapable of healthy change as it continues to present at the doctor's office, visit after visit, year after year

this is our nation;  these are our generations;  and we are politically blind to both the problems and the answers

thank you, MSM!  may we have some more, please?

Mon, 03/26/2012 - 14:45 | 2291908 walküre
walküre's picture

Slewie, you're about to be disappointed

he'll print if and when he needs to

Unless the US government reduces its spending drastically, Ben will have to deliver or the UST will go broke. Plain and simple. It's not really as if they have a choice between this or that. They HAVE TO PRINT. They can raise rates if they like and just print some more to cover it up.

Currency? What currency? Sheeple won't notice anything until their paycheques don't buy them enough gas, food and beer to keep happy. Unemployed and hungry sheeple sitting at home with access to the internet are a central banker's nightmare.

The US is bleeding cash. I don't need to explain to you how and why?

Do NOT follow this link or you will be banned from the site!