Here's Hilsenrath With What To Expect Tomorrow

Tyler Durden's picture

First thing this morning we tweeeted:

We were off by 14 minutes, as today's "Hilsenrumor" appeared at 3:26 pm, giving the market its closing oomph.

By now everyone knows that the WSJ's Jon Hilsenrath is spoon-Fed information directly by the Fed. Even the Fed. Which is why everyone expected the Fed to ease last time around per yet another Hilsenrath leak, only to be largely disappointed, invoking the term Hilsen-wrath.

Sure enough, it took the market only a few hours to convince itself that "no easing now only means more easing tomorrow", and sure enough everyone looked to the August, then September FOMC meetings as the inevitable moment when something will finally come out.

So far nothing has, as the Fed, like the ECB, have merely jawboned, since both know the second the "news" is out there, it will be sold in stocks, if not so much in gold as Citi explained earlier.

Regardless, the conventional wisdom expectation now is that tomorrow the Fed will do a piecemeal, open-ended QE program, with set economic thresholds that if unmet will force Bernanke to keep hitting CTRL-P until such time as Goldman is finally satisfied with their bonuses or unemployment drops for real, not BS participation rate reasons, whichever comes first.

As expected, this is what Hilsenrath 'says' to expect tomorrow, less than two months from the election, in a move that will be roundly interpreted as highly political, and one which as Paul Ryan noted earlier, will seek to redirect from Obama's economic failures, and also potentially to save Bernanke's seat as Romney has hinted on several occasions he would fire Bernanke if elected. Here is what else the Hilsenrumor says. 

From the WSJ:

In the past, it has announced programs with big numbers and fixed completion dates — like a $1.25 trillion mortgage-buying program that stretched 12 months through March 2010 and a $600 billion Treasury bond-buying program that stretched eight months through June 2011.
The activist wing of Fed officials, which support aggressive responses to high unemployment, want a large and open-ended commitment to bond buying. For instance, the Fed could announce it would buy at least a certain amount of bonds over a specified time period and signal they could buy more later if the economy doesn’t pick up.

Announcing an opening allotment over several months would blunt the ability of Fed policy hawks, who are skeptical of easing actions, to quickly call for the program to end. The hawks don’t want another round of QE, but if there is going to be one, they would want a small up-front commitment to bond buying and the opportunity to pull the plug on the program if the economy picks up quickly.

A four-month opening allotment would get the Fed past the election and through a Dec. 11-12 policy meeting, at which point it could consider whether to continue. A five month commitment could get it to a January press conference and another round of forecast updates. A seven-month opening allotment would get it through the first quarter of 2013 and to a March 19-20 policy meeting. If it decides to make decisions on a meeting-by-meeting basis, the next meeting is Oct. 23-24, two weeks before the election.

It’s hard to say how big a program the Fed would launch, here are some guideposts:

  1. The Fed is already purchasing $45 billion in long-term Treasury securities every month through the Operation Twist program and it plans to buy a total of $267 billion by year-end. That marks the lower bound of what Fed purchases will be for the rest of the year.
  2. If the Fed doubles the size of its current program by matching Treasury purchases with mortgage purchases, that would get its monthly purchases to $90 billion.
  3. Its controversial QEII program launched in November 2010 was smaller at $75 billion per month.
  4. Its first round of mortgage and Treasury purchases took place largely in 2009 and was designed to be immense to address the financial crisis. It amounted to more than $140 billion per month, an amount that seems likely to be far beyond the ambitions of what Fed officials are prepared to do now.

–WHAT TO DO WITH TWIST: Officials must decide what to do about the “Operation Twist” program if they launch a new bond-buying program. The Fed is funding the Twist purchases with money it gets by selling short-term Treasury securities. The Fed has two options:

  1. It could suspend the Twist program and replace it with a new bond-buying program in which it buys both Treasury securities and mortgage-backed securities, and funds those purchases with money that the Fed prints — rather than with proceeds from short-term securities sales. This would be more like the QE programs the Fed launched in March 2009 and November 2010.
  2. The Fed could continue the Twist program and launch a mortgage-bond-buying program by its side in which it buys mortgage bonds with newly printed money but continues to fund long-term Treasury purchases with sales of short-term securities.

In either case, the Fed would be launching a program which it considers to be more powerful than Operation Twist alone. One question for officials is which of these two complex approaches would be easiest to explain to the public? Another is which approach entails less risk of public backlash? Many critics worry that the Fed’s money printing will someday cause inflation or another financial bubble. Many officials don’t agree, but they’re sensitive to the argument. The second option would involve less money printing and might help to blunt that criticism.

COMMUNICATION: How the Fed describes its impetus for action, and its criteria for even more in the future, could matter a lot. Is it responding to a darkening outlook? Or has it decided to take more aggressive action because its patience with slow growth and high unemployment is running out and it has a new commitment to changing that?

If it emphasizes the former, it might just depress investors, households and businesses more and backfire. If it emphasizes new resolve, it could spur the public to change behavior in ways that lead to more economic growth but also risk more inflation.

Fed officials have long believed that their communications about monetary policy and the economy are as important as the actions they take, but they’ve struggled to strike the right message.

In a widely debated paper presented at the Fed’s Jackson Hole meeting last month, Columbia University economist Michael Woodford argued that the Fed should signal more strongly that it is committed to an easy money policy until the economy meets benchmarks for more output. The Fed seems to be moving tentatively in this direction. Its discussion about open-ended bond buying is one potential example.
Another: Minutes of the July 31-Aug. 1 policy meeting showed officials considered offering a new assurance that short-term interest rates will stay low even after the recovery progresses.

WHETHER TO LOWER ANOTHER RATE: The Fed now pays banks 0.25% interest on reserves they keep with the central bank. The Fed could reduce the rate it pays on reserves that aren’t required of banks (known as excess reserves) a little bit to try to give banks more impetus to lend. However many officials are reluctant to do so because they’re afraid pushing the rate any lower would disrupt short-term lending markets. It’s unclear whether the Fed will do anything on this front, especially with so many other hard decisions on the table.

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idea_hamster's picture

The Fed now pays banks 0.25% interest on reserves they keep with the central bank. The Fed could reduce the rate it pays on reserves that aren’t required of banks (known as excess reserves) a little bit to try to give banks more impetus to lend. However many officials are reluctant to do so because they’re afraid pushing the rate any lower would disrupt short-term lending markets. It’s unclear whether the Fed will do anything on this front, especially with so many other hard decisions on the table.

Sorry for being as thick as a plank, but could someone please explain:  how the f'k would cutting the excess reserve interest rate (back!) to 0% "disrupt" short-term lending markets?  "Disrupt" sounds like liquidity would be sucked out, making it more difficult to roll over financing, but that's the exact opposite of what the cut would do, no?

Or is today opposite day?

Michael's picture

Thank the Creator nobody watches or reads the Jewtube MSM TV news anymore, as their ratings bear that out.

Their not going to be able to brainwash us into doing what they want and dieing for them this time around.

American34's picture

Wanna be a Fed Super Star, print large, big Bens, armored cars, live large...printin outa my basement gonna screw everybody...gonna print for Obama he is my buddy.

NotApplicable's picture

You ever have big dreams of makin' big green?

Big shot, heavy hitter on the mainstream

You wanna look trendy in the Bentley

Be a star and never act friendly

American34's picture

So you wanna be a Fed superstar?

And print large, Big Bens, armored cars, you’re in charge

Printin outa ya basement screw every body

Gotta order more and more ink constantly

I remember the days when I was a young kid growin' up

Never inflate above 3 never blow it up
The Fed crowd, print money, chill with the honey's

Sign autographs for whatever the printer wants from me

It’s funny how inflation manifests
The prices that be comin' with it, nevertheless

You got to print for the gusto but you don't know

About the blood, sweat and tears and savings lost in years

And bleeding all of your savings to days past gone by
Makin it all manifest for the rich guy
Egomaniac and the brainiac don't know how to act
Bens deep, 6 feet, pallets sweet
Fed Master Ben signed the deal, thinks he's print make a tril'
But always will 'til he crosses over
Still draining your head and savings free
Come with me, show the sacrifice it takes to print in the T’s
You wanna be a Fed superstar in the biz?
And take savings from people who don't know what it is
I wish it was all fun and games but the price of elections is high
And most can't pay the way
Still trapped in what you printin' about
Tell me what happens when the dollar loses clout
The route you took started collapsing
No votes, no bribes, no respect, no change, no women
And everybody craps on your name

TruthInSunshine's picture

As has been said on here before by many, non-stop QE has been ongoing for years. To QE3 or to not QE3 tomorrow has long been a moot point.

Nothing will get the sheeple angrier, in a crazed and frenzy state, to the point of wandering & meandering the streets, violently and randomly stealing/breaking/torching shit, like $5.50/$6.50 per gallon gasoline/diesel and 10%/then20%/then30% higher from here food-and-everything-else costs.

The sheeple, when engaged in random and misdirected acts of mischevious destruction, in an inarticulate grunt attempting to express their rage, not knowing who to precisely target, will feel only temporarily better after each cathartic wave of destruction, and the extent of damage from their more and more frequent "demonstrations" will build and grow with each successive one.


The Bernank's famous last words, before he flees 33 E. Liberty Street like pond scum in the night, flames set to buildings in the foreground and background, will be:


"I had to kill the Federal Reserve Note [what some still adoringly call the U.S. Dollar] to save it."

RSloane's picture

I can't +1 you, but I would if I could. The only doubt I have about your post is that Americans would have to get out of their lounge chairs, turn off the TV, put down the chips, donuts, and beer or diet Coke, and actually wander around outside possibly in inclement weather. Destruction of property requires a lot of energy expenditure and I'm just not sure Americans are up for that. I could be very wrong and selling them short. I hope very much I'm wrong because nothing is going to change until people in large quantities, from all walks and races, hit the streets in anger.

White.Star.Line's picture

My vote for one of the greatest posts, from one of the GREATEST POSTERS on Zerohedge, of all time.

His name was Robert Paulson.....................

cdude's picture

"...meandering the streets, violently and randomly stealing/breaking/torching shit..."

The proverbial breaking of windows as per the Keynesian dream?  

metastar's picture

"Unlimited" Bitchez (regardless of whatever the FED says at any particular meeting). One must merely read between the lies.

White.Star.Line's picture

I can read between the lines..............

Unlimited corruption.

Unlimited Coercion....

Unlimited theft....

Unlimited currency destruction...

Unlimited sovereign destruction...

Unlimited restriction of freedom...

Unlimited depreciation and commodization of the human spirit..

Unlimited destruction of wilderness....

Unlimited death...


Sorry you lose,

Go away fuckers.
We win.

lakecity55's picture

"Occupy" is an integral part of the "Arab Spring" and the color revolutions.

They are also allied with the muslim brotherhood.

Terp's picture

With press credentials hanging from their necks.


Yeah, right.

rawsienna's picture

Michael  - You can get you point across without the anti-jewish remarks.  

Michael's picture

The word Jew is not a curse word.

I have plenty of Jewish relatives, trust me, they know too.

ejmoosa's picture

Actually this is a good example of how the Feds destroy value.

In their possession they are only worth the gold they contain....

And they will collect no taxes on them....ever.

ArrestBobRubin's picture

Michael, in my neck of the woods it's known as Talmudvision.

The term pretty well sums it up its "value proposition".

Dr. Engali's picture

It would screw up the money market funds which would technically be giving investors a negative rate of return due to fees. In other words breaking the buck. There are rules in place to prevent them from doing that but lowering the overnight rate would do just that. This would cause some funds to close disrupting credit to borrowers( withdrawing liquidity).

Comay Mierda's picture

rate wont get cut.  and no QE3 announcement

QE has been going on behind the scenes. Fed/primary dealers have been monetizing govt deficits since 2007. Look at the Fed Z-1 Report, specifically at the total change in credit outstanding for the federal government over the last 5 years.  Then look at how much federal govt debt has increased over the last 5 years. its damn near equal

Ben is saving his political pull for when the banks start falling like dominoes after the global market rejects the petrodollar and rates explode upward.  You will see the TARPx10

idea_hamster's picture

It would screw up the money market funds 

OK, but I didn't think that MMFs held excess reserves with the Fed -- isn't this only depository institutions?

I would have thought that the MMFs are more likely to be in competition with the Fed excess reserve rate for over-night and <30-day funds, while holding short-dated paper.  This would suggest that if the Fed exits the over-night market, MMF funding would be cheaper and their net interest margins would expand.

Am I missing it?

spastic_colon's picture

bingo - and what "high unemployment" are they talking about?  It is coming down quickly now <sarc> plus what does QE have to do with unemployment, proof please mr. chairbeard

bloostar's picture

Further, this presupposes the lendee wishes to take out or ask for the said loan being forced upon a bank to be loaned out. I don't want it, do you?

How does one forcea bank to lend if nobody gives a hoot about the bank and doesn't want the loan?

idea_hamster's picture

I agree -- but don't pay the bank 0.25% on all that money sitting at the Fed.  

That's a 100% bull-crap stealth bail-out, and I don't want my taxes funding it -- my taxes should be dedicated to funding elementary school acoustic guitar classes that teach kids to sing Kumbaya.  Oh, and Hellfire missiles.

DosZap's picture

I agree -- but don't pay the bank 0.25% on all that money sitting at the Fed.


WHY pay them ANYTHING,to hold it?........................cut it to 0.05%.

Either way it's FREE fiat profits.

idea_hamster's picture

Until recently, the rate was just plain 0% -- and that's where I think it should be cut back to, if not negative.

After all, if we all get negative real rates on our deposits, why shouldn't JPM?!

CosmicDebris's picture

I thought Tataglia was the pimp.  Bernanke more the hooker.


Had to get a Godfather reference at least once here. Sorry.'s picture

Tattaglia is a pimp. He could have never outfought Santino. But I didn't know until this very day that it was Barzini all along.

WhiteNight123129's picture

Bernanke is a great guy, he just managed to create wage inflation in fact, and that will mean stagflation and that will pull the the consumer out of his debt, and that will fuck bond holders and equity holders. BERNANKE YOU ARE THE HERO, BY FUCKING THE CAPITAL OWNERS.

LongBalls's picture

Wake me up when gasoline hits $5.00 a gallon.

dick cheneys ghost's picture

It will soon, dont get to comfy

Squid Vicious's picture

$4.999 at the Mobil on W. 96th St. NYC....wake up!!

Sudden Debt's picture

And in Chinatown they charge you 14$ for a pack of Marlboro red...

New York isn't really the mirror of the rest of America :)

samcontrol's picture

from all the folks commuting to work in trucks ? Or retirees going fishing?

WhiteNight123129's picture

Your wages (except in you are in the financial industry) are going to track that soon, so who cares? The hedge funds stacked-up with bonds will get fuck in short order, through a slow motion decline...

SokPOTUS's picture

You may want to front-eun QE3 a bit by running out tonight to fill 'er up...

Meesohaawnee's picture

i dont recall hilsenfuck addressing what crude will do.. never mind. matters to none

Cdad's picture

The price of oil and gasoline is the leading indicator that no program will be announced tomorrow.  Of course, gasoline was selling off hard all day, so provided the HFT goes to work again on it tomorrow, the price of gasoline could be low enough by noon to go ahead with the money printing fiasco.

That we are talking about any of this simply reveals just how tall of a Banana Republic Tree we have climbed up in the last four years.

The Bernanke SHOULD BE dragged out of the Eccles building tomorrow morning prior to any such disasterous announcement.

More banker pink slips please.

LMAOLORI's picture



The Chair Satan does not care I repeat does not care what you pay for gas or food either for that matter

The Price Of Oil Is The New Economic Spoiler


"What’s today’s lesson. Crude oil in the US is back up to $96 a barrel in the light of an extraordinary rise in the volume of trading in energy futures. The speculators are betting big time on QE3 damaging the dollar, driving up the price of oil– and putting us back in another recession in 2013. So far in 2012 futures trading is running at the shocking level of 25.2 times world demand for energy. This compares to 14.7 times in 2008 when crude oil hit $147 a barrel, and George Soros went short. Sharma is showing us what his hedge fund clients are doing and it is not beneficial for anyone below the wealthiest segment of the nation."