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The Fed's Balance At The End Of 2013: $4 Trillion
What happens next:
- Imminently, the Fed's Open Markets Operations desk will commence buying $40 billion in MBS per month, or about $10 billion each week. Concurrently, the Fed which is continuing Operation Twist, will still purchase $45 billion in "longer-term" Treasurys, sterilized by the $45 billion or so in 1-3 years Bonds it will sell until the end of the year at which point it runs out of short-term paper to sell.
End result: every month through the end of 2012, the Fed's balance sheet expands by $40 billion in MBS.
- Beginning January 1, 2013 the Fed will continue monetizing $40 billion in MBS each month, and will continue Operation Twist, however it will adjust the program so that it continues to increase its long-term holdings at $85 billion per month, without sterilization as it will no longer have short-term bonds to sell. It will also need to extend its ZIRP language "through the end of 2016" so all bonds 1-3 years are essentially risk free, as they are now, in effect eliminating the need to sell them.
End result: every month in 2013 the Fed will increase its balance sheet by $85 billion, consisting of $40 billion in MBS, and $45 billion in 10-30 year Treasurys, or the natural monthly supply of longer-dated issuance. The Fed will therefore monetize roughly half of the US budget deficit in 2013.
Putting it all together, the Fed's balance sheet will increase from just over $2.8 trillion currently, to $4 trillion on December 25, 2013. A total increase of $1.17 trillion.
This is what the Fed's balance sheet will looks like:
Another way of visualizing this is how many assets as a percentage of US GDP the Fed will hold on its books. Currently, this number is 18%. By the end of 2013, the Fed's historical flow operations will be accountable for 24% of US GDP.
Why is this important? Simple: when the time comes for the Fed to unwind its balance sheet, if ever, the reverse Flow process will be responsible for deducting at least 24% of US GDP at the time when said tightening happens. If ever.
What is scariest, is that as of this moment, all of this is priced in. Any incremental gains in the stock market will have to come from additional easing over and above what Bernanke just announced.
And finally: Fed's DV01 at December 31, 2013: ~$4 billion
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I hope the Asian markets throw a hissy fit overnight and tomorrow is Christmas morning with it at $1,900.
I'd rather have a small creep up before lift off. Personally I think that silver price needs to get out of reach from the sheep before gold lifts off.
Who knows. Like you have been saying today. This will not be a controlled situation from here on out. Shit, Germany has to be seething at the Euro right now. They prob come out tomorrow and set Draghi loose.
Hard to believe they are really this stupid..
Central planning through and through...
My thinking is that the eastern markets have been holding the price high and now it's the west's turn to catch up. With people like Soros, Paulson, Gross, Einhorn and Dalio talking about gold as an asset recently and making "investments" into it (as well as others I've seen on the financial "news" outlets) the west will wake up like it was dropped into a scalding bath of oil (or ink depending on your choice of imagery) to get some hard assets.
Or the Asians will just keep buying. Either or...
Suddenly I find myself rooting for the Mayans.
We'll make it through 2013. I'm even betting we make it to 2015.While we're seeing hints of inflation and countries realigning outside of sphere of USD as the reserve currency, we're nowhere close to the point where the dollar is rejected enough (aka creditors pissed off enough) to trigger hyperinflation, and normal inflation isn't anywhere near where it will eventually be.
However, we won't make it to 2020, I'm certain of this. So the wheels fall off probably around 2015-2018. My bet is on 2016-2018.
The scary part of this is what Tyler touched on -- and something I keep pointing out to anyone who wishes to discuss this -- half the budget is being financed by the Fed (it's about 40% now.) This is scary (and critical) because when the inevitable does happen (be it a full currency collapse or, laughably if the government decides to balance the budget to save itself) because the Laffer curve and Hauser's law shows we'll never see more than about 30% GDP in tax revenue.
It is completely certain and inevitable that we will see a massive shrinkage of the real costs of the federal budget of such magnitude it can only be achieved by huge demobilization of the military and cutting the social services budgets by half or more. And this assumes an economy unaffected by any of this! The current problem is completely unfixable, regardless of a government collapse and "reform," conversion to full-on communism, you name it, it won't be able to fulfill even half the promises made or sustain the current standard of living, regardless of what it promised at that time.
Why do I think it's 2016 and no later than 2020? GDP is presently about 15T, US Federal budget is 3T and we're going to be seeing half of this from the fed -- 1.5T. That's 10% inflation per year, just from printing to cover the deficit, and it's increasing. By year-end 2016, that's 50% inflation; by 2020, we hit 100% inflation. The dollar will have devalued as much as what would need to have been cut from the budget to fix the problem -- so either way we reach the point of maximum pain in those years. Most probably the budget and printing will expand faster as inflation increases, as the government tries to keep operating at the status quo, and this accelerates things. If they don't, we could get as far as 2020, if they do, the pace quickens, and maybe we hit the 100% point earlier; it'd take 20% inflation to get us there by 2016. If gold is any indicator, the current annual rate of return compared to 5-6 years ago is about 16% in USD, and using that as a proxy for real inflation rates results in 100% inflation (USD value cut in half) in 2017.
There's time left. Not much, but there's time left. Today's move by the Fed signals the terminal phase of this disaster.
I feel chained in the back of the cab of a gasoline tanker as Ben and Obama smoke meth ,blast rap and and push on the accelerator.
It matters not if you are within 300 yards of a gasoline tanker.
A mile of a Propane tanker....
10 miles of a ammo truck.
Anywhere within earshot of a Bee Truck...
The issue not being discussed is simply this:
Where are the MBS coming from?
They aren't part of government fiscal deficits. They are bank balance sheet trash that aborting Mark To Market has allowed to remain invisible to accountants.
There are 10s of trillions of this shit on bank balance sheets and the Fed is willingly taking the shittiest of it onto their own balance sheet.
Someone should hang for this. This is buying bank balance sheet nothingness and paying 2004 prices for it, using taxpayer money.
Someone should surely hang for this.
Am I wrong or didnt the Treasury also bought MBS from the banks back in 08-09?
You're mostly wrong. Treasury bought preferred shares and outright common shares to recapitalize the banks. They bought no MBS that I know of. Treasury has no department devoted to owning mortgages.
if you don't count the agencies.
lololololololol
Exactly - as I explained to my Senator today. This is simply Criminal - but not all that surprising since the FED is owned by the banks anyway. The Criminal part is - the average Joe is too ignorant to understand what is happening - and the Congress who is supposed to be informed and looking out for stupid Joe - is allowing it to happen. I'm sure at the end of the day when it all blows up - they too will claim they have been had - and stupid Joe will buy that too. Sad Really.
funny but i bet your congressman was standing there thinking 'god i wish this stupid joe would just shut up and go away' as he was nodding agreement and smiling at you and thinking 'this stupid joe just doesnt get that i know all about the corruption and i am profiting from it'.....
Does anyone know who are the MAJOR Shareholders for the Fedreal Reserve? And if someone Knows can you Publish who they are!
http://www.usagold.com/federalreserve.html
http://www.whale.to/b/mullins50.html
glad my name isn't joe
"The price of apathy towards public affairs is to be ruled by evil men" -Plato
1.) Who exactly is on the sell side of all the trades, and what are the terms? I.e. price, repo agreements if any, conditionalities?
2.) Can anybody with knowledge of MBS prices before/after QE share some insights?
Entire US resi mortgage market is only $10 trillion.
It is now, if you overprice the value of the mortgages.
What was it in 2005?
Well, since the national median home price has dropped about 1/3 since peak, one could assume the retail residential real estate market in 2005-2006 would be about $15T.
Sounds reasonable. So a bit of hyperbole on my part about 10s of Trillions.
We'll go with . . . say, 7 trillion of MBS shit on unMarked to Market bank balance sheets, recorded on those balance sheets at a full 7 trillion, instead of the actual 2 trillion.
At 40 billion per month, Ben will have that 5 trillion of bullshit absorbed in what, 10 years? You realize what the world will look like if he then tries to withdraw 5 trillion from the money supply?
This is becoming a joke
I thought that "those who owned the tungnsten mAkes the rulez." Am I wrong bietchez??
This is buying bank balance sheet nothingness and paying 2004 prices for it, using taxpayer money.
It's not *just* taxpayer money. The Fed's game is global, not national. Plenty of non-taxpayers are getting fucked, too. But as bad as this is in every "real" sense, it STILL APPEARS BETTER than the alternative for *everyone* involved in the decision process.
The "inflation cost" is borne by everyone on the planet who holds dollars. That's considered a better price than letting the dollar "value" go to zero. People will continue to play ball until the inflation losses begin to approach the cost of trying to reprice all assets into a different currency (or commodity).
@crashisoptimistic
Hey Crash,
I agree with you completely with the exception of:
"This is buying bank balance sheet nothingness and paying 2004 prices for it, using taxpayer money."
It is not really 'taxpayer money', if the taxpayers cannot pay or if it is ruled 'odious debt' like the US declared in the case of Iraq before it set up Iraq's new CB.
Maybe, the Fed has hung itself this time----time will tell whether 'we the people' have the balls to give it back to the Fed in one way or another.
Please tell me if I am wrong about this---an oldman can't remember everything.
Thanks for the good post om
The Bernanke/Draghi hangover is about to begin! Tyler is/was epic on the call!
I'm proud of you for taking their advice. Stick to the regimen!
Jendrzejczyk pre or post war Polish?
Just an Avatar Yen. Somebody wacked me/him in the head in broad daylight in DC and I just want his work and life to be remembered. His first name was Michael.
http://www.nytimes.com/2003/05/04/obituaries/04JEND.html
I've heard what the official story is, and I KNOW what the cop told his widow the day it happened.
I read the obit. He seemed like a hell of a guy, despite the Pelosi endorsement. Everyone here has a story that comes out eventually, if you watch for it.
I thought several Tylers repeated, just about two weeks? one week? ago, that no QE was possible, and that only light easing (if any) would be announced, that Ben only had one wad left to shoot, and he would save it for when the market was tanking??
Or did I read that somewhere else? Or misunderstand it?
Didn't we learn today that good news is never priced in.
QE3 was priced so cnbc says...?! if it was, why did we go up...?
buy the rumor....buy the news (with both hands)
Don't worry, everything will run smoothly with competitive devaluation.
/sarc gold/chf all-time high of 1661 ftw
So what's the problem? They take title to property with thier dying clown bucks and become everyone's land lord before their currency goes completely tits up. When the money becomes worthless in a couple years they'll own everything and then they issue a new clown buck. How do they lose? Too easy. How is this not bad for the Fed? It's like stealing candy from a baby. You ever watch any of the programing on American Television? It's all geared towards ignorant retarded adolescent adults in a fluoride coma. They won't even notice. CNBC has already been telling the catatonic public it's all good. It's been the plan all along.
As has been said, what kills all of this is oil.
Clownbucks are clownbucks. Gold has no value to society. And so oil is the yardstick and it is getting scarce.
Bernanke is killing far more people than scarcity had to kill.
Gold's value is that it buys oil.
It sure lets the Turks buy Iranian oil
also lead and iron to propel.
seriously folks, 9mm at 25/100 rds; say 50k rds = 12000: what will that be worth?
answer: 25,000 as that is what happened while gold doubled-to a fucking tee.
But it has utility i can not explain unless you enjoy shooting da shit...
Don't forget, the other clown, the one in the white house, will just read off the teleprompter about releasing oil from the SPR and all will be well.
no no no no.
A little drip from the SPR is going to be absorbed like a spot of spilled gas by a blue rag.
And then discarded into the national trash can on top of the discarded ciggie butts...
already tried that, worked for about 48 hours... not saying they wont try it again, cuz these are "strategic" times for sure...
ZIRP through 2016? Peak stock market?
Pension funds = timber
Some years ago our local mill was crying...
Now I think tomorrow is the day they sing Hallujah and fire up the gang saw.
I am still holding on to what few trees we have left. That means hot water and life when no utilities are left.
"The Fed will therefore monetize roughly half of the US budget deficit in 2013."
And at some point when it is "Appropriate" - the U.S. government will simply abolish the FED, sieze their assets, and apply them towards the national deficit. Easy Smeezy.
Wow. Fed will legally own assets worth 24% of US GDP in 2013. How did they manage that?? Hmmm??
The FED is buying the U.S. with the U.S.' own "money".
COUP bitches!
Not to mention destroying the value of what you earn and thus pricing you out of the asset market at the same time.
Serfdom bitchez....
Pretty simple, but still no one gets it.
"Sure I'll buy your assets. And you give me the power to invent the money with which I'll pay you? Oh, then I'll give you an excellent price indeed!"
This all assumes no change in status quo/regional wars/global warming/homeland attacks/nuclear incidents/tsunamis/uprisings/congressional fuck-ups/etc/etc/etc
Doesn't this assume there is a Fed in the end of 2013?
"Any incremental gains in the stock market will have to come from additional easing over and above what Bernanke just announced." - or incremental gains could come from resolution of fiscal cliff, or better-than-expected earnings, or better housing data, or better unemployment data, or good news out of Europe, or better US econ data of any sort, etc. etc.
I think it's time for the deflationists to admit they were wrong and capitulate.
On the other hand if you want to be stubborn and think your dollars are going to increase in value, keep on holding them. Thanks for the free money. The money I'm borrowing at below the inflation rate is mostly yours.
No, I don't think so. Bernanke has just ensured the big deflation will come. And this time the politicians will hopefully get their act together.
Stock market will start going down soon, if not Tomorrow.
Not so with gold and commmodities. They still have a ways to go......
We are kind of where we were back in late 2007, where TODAMOON was the motto, (subprime was contained, his own fucking words), oil and commodities almost got to the moon, in the process crashing a weak economy (which by the way was not as weak as it is now), this sent the BALTIC DRY INDEX to its lows, (we are already there now) and setting up the OIL crash along with all commodities in the summer of 2008........
This fucker could not have chosen a better time to trigger a real depression!!!
They blew past the moon long ago... the great threat is the NEO's as it whizzes by close to the Earth and Moon.
One of those mountains fall to earth, I'll be sitting on the Levee with a smoke, whiskey and a woman.
The only reason this is being done is because Bernanke's still terrified of deflation. He's trying to hold up the sky. You think the SKY should capitulate given these odds?
bernanke and obama need our prayers
Yes, I pray everyday they die a painful and humiliating death.
Crap, that was fast! Black Escaldes just roared up.
+1 Thanks for the laugh, I really needed one today!
They tend to part traffic like Moses parted the red Sea.
I got run over by a Prez motorcade once on I-495. Having to get out of 5 lanes worth of stubborn, onery, tight fisted, foul mouthed commuters until they too beheld the red/blue of the on coming Prez. So they went to both sides right away leaving me in the middle of three lanes with black war trucks and limos blasting by me on both sides.
Thankfully the Cider load in the back jingled but did not break in the old glass gallon jars...
I think I might still have one or two... pretty good for a drink now that I want one.
You forgot the <sarc> tag.
Osama family will be happy to see higher oil prices. Beloved friend in Russia mr Putin will also welcome the news. Those who do nothing but live on Obama's help will also get some scraps.
But those who produce will get punished with higher input prices and inflationary Tax.
Welcome virtual Economy.
Mr. Putin raised interest rates today. A very smart move as he continues to by gold on dollar weakness. US of A is being outplayed on all fronts.
And who is the #1 oil producer? I believe it is Putin with his Petrorubble.
Trouble is they will crash the western world with the upcoming spike in oil, demand is already very low, that's probably why oil did not do much Today...... but the tide of money is coming, that will create the oil spike that will send all comatose economies in the western world tits up setting up a crash that will make 2008 look like a pic nic.
In the mean time Putin and company if they are smart should hedge their oil production at the spiked prices..... Bernanke will end up with garbage MBS in his portfolio.
And Putin continues to work the Bastion Stragety into a world winning ability to claim everything above the Artic Cicle... alaska included. Add that to his already vast holdings of Timber, minerals and what have you across the USSR...
I hate the man but at the same time... I like him too goddamn it.
What a nightmare! Great charts!
The losses are gonna be epic.
Where is Sudden Debt when you need him?
http://www.newyorkfed.org/markets/ambs/ambs_faq.html
"Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for purchase."
Hahahahahahahahahahahahahahahahahahahahahahahahahahahaaaaaa
Haaaaaaaaaaaaaaaaaaaaaaaaaa
They will only purchase securities guaranteed by Fannie Mae? The insolvent Fannie Mae who is hooked up to a life support feed from the US Treasury? The US Treasury who borrows to meet EVERY new obligation? Borrowing funds which come from .... WAIT FOR IT ..... The Federal Reserve?
What a freaking pathetic joke.
SD took a late vacation to avoid the Plebes.
I'm gonna be trying to avoid the Plebe Smashers. (Large Blue Hummers)
The same fannie who is walking the long legs with the VA loans too?
So what percentage of GDP growth will the fed be responsible for each quarter in 2013?
-.5 ^ (no. of quarts)
Fed to unwind its balance sheet, if ever
Practically speaking it could never happen in an orderly fashion. That's what's so deceptive about all this bullshit. It's not even short term manipulation of the money markets. It's a permanent one way expansion, and effectively a tax by government entities that we all eventually must pay for. The only way the Fed balance sheet could ever be unwound is in a catastrophic collapse in which all value is destroyed. And, the larger their balance sheet is, the more likely that is to happen.
What you never hear from anyone at the Fed or TV or anyone is how they are going to sell all this shit. What is going to happen to comercial real estate when they dump a trillion worth of MBS on the market. For every action there is an opposite reaction it just delayed.
The majority of this generation only thinks of itself. Not one person or article has addressed how this is going to affect the next generation. What happens when they sell these treasuries and the interest rates go up, or sell these MBS or all the worthless stock.
the private gold vaults at the rothchilds, bilderbergs, rockafellers underground survive the shitstorm you created bunkers must be breathtaking. Lets go find them.
In time grasshoppers... in time.
One day our children's children... aka the Roaches will come out and start crawling all over everything until they do find something good.
The right comparison is with total US financial assets, which are around $50-60T (I think). By the end of 2013, the Fed will own about 8% of that, which is large for one actor. It would probably take a good fraction of a decade to unwind it, without doing serious damage.
Of course, by that time, who knows? The whole government-Fed complex might be bankrupt ....
total US financial assets, which are around $50-60T
LOL. I bet it's not even worth 10% of that.
They'll never unwind it. "Held to maturity" and then forgotten about.
The politics of international Debt
(http://books.google.ca/books/about/The_Politics_of_international_debt.html?id=Kga0AAAAIAAJ&redir_esc=y)
This Debt is going to used as a tool to Delay and Control Developing/developed Countrys global compeditivness and even indivduals rights. It's Cashing checks on Behalf of the Future young radicals and anarchists that will proably not tow the line.
Who are these stupid people that let these klowns in?
(Denninger, we already know you are one. No need to raise your hand.)
Tylers, I heard Benanke say today the Fed will hold many of their treasury assets for the duration. In fact, I thought he admitted that the Treasury did not really need to pay the Fed. I was surprised, because this is the essence of Printing Money for Uncle Sam which he continuously denies doing.
If this is true, the Fed's deleveraging plan is a natural process that invovles a little selling of this $4 trillion for normal monetary needs. Wealth destruction matches inflationary money printing is Daddy Bernankes algebraic formula.
The federal reserve in simplicity is just a Big credit union that can tap into the hypothedical GDP profits and tax slush funds of the U.S.of A.
Let me be absolutely clear: YOU MATTER TO ME.
http://www.whitehouse.gov/schedule/complete/2012-08-14
Crap, that was last month. Here's tomorrow.
http://www.whitehouse.gov/schedule/complete/2012-09-14
Nothing scheduled for the rest of the year, either. Funny!
Well, they picked a good for weather here CO.
Santa has his sleigh and Bernanke has his helicopter. Bernanke's helicopter has just taken off and is heading directly for Wall Street.
I feel as though things are a little out of balance (like my freedom is no where to be found)
Many goldbugs think the dollar will get slaughtered and they'll be able to emerge as the power class on the other side buying up assets for pennies on the dollar. They seem to forget who the owner of the assets will be - the Fed.
There is no need for gold confiscation. People will be bringing it right back to the bank.
- How much gold do you want for that?
- How much have you got?
And how many are you willing to kill to hold on to it?
Not at 50 silver to one...
try 12 to one.. then we'll talk eh?
2016 presidential party: The % of GDP is Too Damn High.
http://www.rentistoodamnhigh.org/
But golf games are cheap, right? If it weren't for that truck-butt wife.....
You mean Chewbacca? Wait'a minute, there's a knock at
Vaccines have already suppressed your immune system.
Why would you want another one?
Refuse ALL Vaccines! (The knock was just some mormons wanting me to vote for 'R')
That's not how a vaccine works. They stimulate the immune system. But let's digress.
What am i missing.
$4 trillion is equal to $13,300 per person in the USA (every man woman and child in the USA, 300 million people). For a family of four that is $52,000.
If instead of purchasing MBS etc they extended a line of credit DIRECTLY to every family with say net worth of less than $200K of $52,000 at zero interest (what they are effectively giving the Banksters, would this not be infinitely more stimulative? (My guess is that even a fifth of that would be more stimulative in the right hands then what they are doing).
You are missing the illegal portion, Drives the cost way down.
This is why Bernanke is evil. The Fed's distribution of money goes to the rich oligarchs why he tells the common man he is saving them from the next great depression. The people who stole the wealth going up; also still the money coming down the deleveraging pole.
The oligarchs of Russia and oligarchs of USA maybe different people, but they have the same callous cold greedy and evil souls. Bernanke is their hit man!
Not that pole... the one suzy rottencrotch is showing off tonight.
...I was thinking of that pole exactly....slick with love juices between the Bankstars and their whore Bernanke!
ludwig_von_mises
What are you missing ? You, sir, are not a member of the club.
The question:What would you do if you could wake up and create money legally?
think long and hard. this is fucking bullshit. most people have to work 5-6 fucking hours for one c note.
most likely doing some shit job for a narcissistic looser that got promoted beyond his or her ability.
if only people knew wtf is really going on. also check out max k's latest vid about jersey(UK) and the est 20+T
stash from ripping everyone off everywhere. these are the central bankers, and riff from drugs, the whole top of the pile.
caymen, jersey tax free money scheme. london calling, are you listening?
If Romney wins, and he has the sense to replace BB with Yours Truly, my stimulus plan will consist of creating a Federal Lottery. Instead of making pick 6 numbers from 1 to 50, it will be one number between 1 and 10. Tickets will cost $100 and winners will receive $1MM. There will be a Federal Winners Tax of 99.9% on all winnings. Think about all the jobs we can create! Happy days, indeed!
So, if infinite QE is now completely priced in, does that mean we have to start trading on the fundamentals again? Oh, Shit.
And BLS will continue to lie about real inflation while Bernake monetizes the debt.
Here's the thing. Anything less than 40 billion/ month will now cause a market crash. Think about that for a minute. Let it sink in. No going backward from Weimar now, the Rubicon has been crossed.
Correction: anything less than $85 billion becuase the long-term purchases ($45 billion/month) are part of the Flow calculation entering the system since 1-3 Years are ZIRPed.
Tyler/ r/u Chineeze? ( ghost spending) on bridges to nowhere?
It basically means that in a typical Pyramid Scheme (Ponzi, Madoff), Newcomers are always required in order to provide funds for the payout to the previous members of the pyramid.
Since the suckers are retiring and pulling money out, then the FED BECOMES THE NEWCOMER ready to payout the fund.
So, the Fed is the real Sucker or the Last Resort. But, Flow (infinite) devours the Stock (finite). The end point is theoretically the Fed buying and owning all means of production.
We used to call it communism.
Tyler knows we know "EKM". I was lurking for " Identity".
$85 billion here, $85 billion there, PRETTY SOON...........................
Bring up Dow & S&P charts before and after QEs, note the rallies are getting shorter (duation) and sell offs sharper. QE3 rally is still ignoring terrible fundamentals in the global ecomomy, China/HK (dollar peg) just got a dose of inflation, and they have been grappling with stagflation. China is still going to blow. In summary, a crash is still on th cards.
The market is dangerously overbought.
If the Fed ends up purchasing all the mortgages doesn't that make us all renters?
Yet another who has been fooled/deceived by the powerz into thinking they are not renting now - try not paying your property taxes (ie, rent) and see how long you remain in your "owned" property. (I was once a sucker too - reformed for 6 years now)
Utitlites cost less than 1/3 rent these days.
Taxes each year is a few hundred at most.
Gotta get the fuck out of the Coasts silly... come south... they have plenty of something something to lure you Yanks.
Renting isn't so bad. No strings tying you down can be good.
I wouldn't buy a house now so renting is the way I'd go if I was starting over.
the race is on for the donkey kong prize; the FED against the ECB. Its like that Ben Hur race, winner takes all.
BoJ is in the race too.
It seems odd....no banks just failed, no twin towers just collapsed, nobody is starving, stock market is going gang-busters, housing and employment are lackluster - but not the end-of-the-world stuff.....and yet.....our central bank has just announced it will create more money and buy financial instruments from the market until the economy is "better". Wow.
Of course, you have to ask yourself, what would happen if they had said "we're done" and stopped buying crap with new money. How would their puppet government have kept on placating the dull-witted masses?
https://www.youtube.com/watch?v=7VG2aJyIFrA
THIS will stop the money. All of it.
$40 billion/mo should be going to rebuilding US infrastructure and other productive uses instead of the pockets of the TBTF banksters.
What the.....4 Trilll.....chump change....plse wake me when you start talking real money!
....and thanks for buying physical gold and silver.
...and the miners.
Look at the bright side.
Romski could be elected, and appoint the Bamster to Ambassador to Libya.
Klown could experience necrophilia first butt.
hockey stick, bitchez!
Tyler,
Where does the Fed state that Operation Twist will continue after 2012? That was not mentioned in today's Fed statement. The $85 billion only lasts through the end of 2012, according to today's Fed statement.
"To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."
I read the Fed to say 85 bil through year end, then at least 40 bil monthly after that. Still completely fucked, but 480 bil per year minimum money printing, not twice that yet. I guess I'm not understanding why the implied continuation of twist. Related to zirp somehow?
I hope Tyler responds, as that is a good question you raise.
I'm not Tyler, but....
The only way that Bernanke can sustain the wealth effect from a QE, is by more QE. This is because if, by the end of the year, he stops, the bond ponzi will quickly unwind as rates start to rise. As rates rise assets prices EVERYWHERE will fall and we will once again learn that THERE IS NO FREE LUNCH. Remember how 2010/11 was shaping up for a retest of the 2008/09 lows until Jacksonhole, which, such a retest would have at least been consistent with GDP and unemployment measures? Now, we just have further to fall to get there is all. So. No biggy.
Thanks Pareto.
It's all about the flow
...and Tyler here:comment-2792382
So, $85B/month after 2012 (though not stated/admited by the Fed) is what is implied they will have to do.
This isn't QE3, it's "Speed III".
"The Fed's balance sheet will increase from just over $2.8 trillion currently, to $4 trillion"
it's possible that it explodes that quickly but you aren't taking into account that the 3-6yr paper will eventually mature into the 1-3yr category. So for purposes of this 2014 discussion you'd probably want to see how much 3-5yr paper they have also.
"without sterilized as it will no longer have short-term bonds to sell. "
possibly...They could also take a page out of the ECB's playbook and do repo's and term deposits to sterilize.
QE will disolve the American white middle class into the Ghetto aka the equivilant of what the Brazlian middle class are A tossed salad. This helps bring places like India and Chinas higher on the pecking order, like A African with Cell phones does. They are re-distributing wealth into the world comune in hopes of making everything more rosey .
They aren't re-distributing it; they are destroying it - and that "middle class" along with it. All they need are plebs, middle classers epect shiny things, plebs are happy to eat once a day.
We live in very interesting times. Read that franchisers are saying their profits will be cut in half by Obamacare. That can't be good. The end of the world as we know it = no McDonald's.
http://washingtonexaminer.com/franchisors-warn-obamacare-will-halve-prof...
ZOMG! If it kills McDonald's, ObamaCare will be one of the greatest boons to humanity of the decade. Bigger than a cure for cancer.
I'd be wary to hold out such hope, though...McDonald's is better than the cockroach.
double post
as Clint Eastwood, so "Succinctly said" empty chairs aside. " I tried being reasonable, I didn't like it!
I would say it is not priced in at all, everyone is going to be a millionaire.
I saw that skit on SNL w/ Dan Akroyd portraying Jimmy Carter asking "everyone will be a millionaire!" with all the inflation. Guess what? I still am not a millionaire. That was 1978?
BB will get the sack and a new, painful, regime of austerity will begin after the election. The new FRBNY FOMC will start soaking up that gravy and you better hope you have a year, or two's, expenses banked when the SnP goes to 444.
Don' hold your breath waiting for the Weimer Republic replay here. I don't think it will happen.
"Austerity" is fiscal policy. The Fedhead's gig is monetary policy. They can't be substituted for each other, 'cause bankrupt is bankrupt and insolvent is insolvent.
So does this change anything about Silver, or is it still set to hit $100 by Jan 2013?
A brilliant comment from another article I was reading:
"the only cheap asset right now is: money ...every time this has been the case in history it has ended in bubble and tears"
interesting concept. What a crazy world this is.