• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Why Goldman Is Surprised By The Market's Reaction To The Twist, And What's Next For The Fed?

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Thu, 09/22/2011 - 00:16 | 1695659 drwillia
Thu, 09/22/2011 - 07:36 | 1695833 Spirit Of Truth
Spirit Of Truth's picture

Screw Lloyd Blankfein and GS.  God does His own "work" and it's not subject to the money-sucking whims of the giant vampire squid on Wall Street.  

http://www.youtube.com/watch?v=tOWsSRzSCmM

Thu, 09/22/2011 - 09:27 | 1696590 Hedgetard55
Hedgetard55's picture
Isa 43:13 Indeed before the day [was], I [am] He; And [there is] no one who can deliver out of My hand; I work, and who will reverse it?"
Thu, 09/22/2011 - 00:44 | 1695707 Silver Kiwi
Silver Kiwi's picture

a couple of questions;

 

If  the Fed is selling short term treasuries to buy longer term treasuries; who's the big buyer for all the short term paper in a couple of months when the world suddenly wakes up & realises that it's worthless and

 

I'm assuming that all the 30 year treasuries that Pimco snaped up over the last few weeks will now return them a very nice profit as the Fed buys them. Any idea what sort of margin we're talking for a couple of weeks work??

Thu, 09/22/2011 - 11:40 | 1697207 A Proud Canadian
A Proud Canadian's picture

I have the same questions.  Why wouldn't the fact that the Fed is going to sell all those short term bonds drive the price down (and hence the ST interest rates up)?  Wouldn't this selling the short end and buying the long end tend to invert the curve?

Thu, 09/22/2011 - 01:02 | 1695724 Yen Cross
Yen Cross's picture

 Goldmans isn't surprised. They are flabberghasted. Why is George Soros on my Asian feed (CNBS) with [Maria} ba-ba-wa-wa?

   Tyler soros just transferred his wealth to his so" called family ( investment scheme) to avoid the CFTC(United States) broker aggreements! He liquidated 1/20th of his holdings. Can we do a follow up on this ass clown, that want's to tax the " Wealthy"?  

 

What is wealthy? 250k is chump change!    P.s. Nice divergence on that bottom chart. Like quadrapeds walking up a wall.

 

     In (O) Gravity.

Thu, 09/22/2011 - 01:50 | 1695821 Maniac Researcher
Maniac Researcher's picture

Most of the people on this planet will never see 250 grand in their whole lives. You are utilizing a delusion to support your ideology.

Thu, 09/22/2011 - 03:30 | 1695958 myne
myne's picture

You're technically wrong, and most likely will be nominally wrong.

Technically, most people will see 250k easily by the time they're 30. They just have to spend it all to live.

But your intent is clear, that they're not likely to be able to invest 250k in their entire lives. So on that part you're right - in real terms.

Nominally, on a long enough timeline, the minimum wage will be 250k one day. I suspect that this time line in some countries is going to be rather compressed.

Thu, 09/22/2011 - 06:23 | 1696085 GubbermintWorker
GubbermintWorker's picture

No, technically you're wrong. The latest figures I could find are from 2005 and I'm too lazy to find any newer ones but , as of 2005, people living in rich countries had an average income of about $35,000. The high incomes in these countries make the world average income four times larger than the world median income, which was $1,700 that year.

I seriously doubt that people who make that much, or less, will live to be over 150 years of age.

 

 

Thu, 09/22/2011 - 03:11 | 1695928 ReactionToClose...
ReactionToClosedMinds's picture

them pitchforks are acoming ....

... just read how FDR 'New Dealers' did a "Star Chamber" on former Treasury Sec'y Mellon in mid-1930s.  I went to law school and have worked corporate/commercial/taxes  before being pure biz person entire career.

Never ever heard about any of this in law school or outside ..not one law review article on this travesty.

to the uninitiated... to say "Star Chamber' in the law essentially means they made up all the processes and arguments of law to persecute him for essentially purely political reasons.  I am not overstating this ... Mellon essentially faced  a Putin or bolshevik 'due process' ... this is exactly what it was.  There were no 'facts' to the case ..... but they came after him anyways ... repeatedly for years ..l  they (FDR approved it , Sec'y of Treasury Morgenthau advocated it, Attorney General Homer Cummings enthusiastically sought to find avenues to prosecute all this ....) made up 'new rules' for prosecution 'on the spot'..... becaue they wanted to ....he was the archenemy.  I never knew this happened in the USofA  except under Jim Crow in the Democratic Party old South. 

Rule of Law    Haaaah   ...depending upon the political moment that is ......

why do I waste your time bringing this to your attention?  Becasue if it happened then (and no one ever remembers it for convenient political conscience) and it will happen again ...when it suits the public's or political winds purposes.

here they come ..... will it be you ... or you ..... or your neighbor ..... or relative ....

 

 

 

Thu, 09/22/2011 - 00:59 | 1695739 wattsnotsaid
wattsnotsaid's picture

Now with long terms rates lower,, our retirement income will be even lower .  No wonder we're not spending and not retiring--- keeping the unemployment rate high.

Thu, 09/22/2011 - 01:06 | 1695749 alien-IQ
alien-IQ's picture

Well...judging by the futures and FX trading tonight...the market isn't quite done "pricing in" today's news.

/ES down another 5+ points
EUR/USD nearing 1.35
AUD/USD at parity.
DXY just slightly above 78 for the first time since Feb of this year.

and just for shits and giggles...check out the daily chart on USD/MXN (that Mexico vacation just got a lot cheaper in the last six weeks...and especially the last 6 days)

Thu, 09/22/2011 - 01:10 | 1695760 Milton Waddams
Milton Waddams's picture

In the old days, say circa 2006 - 2007, a flattening yield curve was indicitive of monetary tightening.  I suppose in the modern era this can be perceived as tightening but... but it ought to be beneficial to: fixed income traders, real estate speculators and the dollar. 

Thu, 09/22/2011 - 02:51 | 1695896 ReactionToClose...
ReactionToClosedMinds's picture

exactly ... but methinks the 'waters' are too 'muddy' for anything to work but clearcut paths to 'resolution' ... whatever that may be

Thu, 09/22/2011 - 01:14 | 1695770 mcguire
mcguire's picture

i still cant believe they are buying MBSs... what a total farce.. 

Thu, 09/22/2011 - 01:44 | 1695813 ItsDanger
ItsDanger's picture

Ben's actions today was pathetic.  Does any rational person think that his strategy would change anything?  What a waste.  Negligible impact at best.

Thu, 09/22/2011 - 02:12 | 1695844 Solid Gold Bubble
Solid Gold Bubble's picture

Operation Pancake, bitchez

Thu, 09/22/2011 - 02:27 | 1695847 Sizzurp
Sizzurp's picture

The problem is debt... we have to much of it, and until it is liquidated or re-organized it is going to be a ball and chain around this economy.  We are going nowhere but perpetual recession. There is no escaping the pain, but this action by Bernanke isn't going to address the problem of debt.  All it does is keep the debt bubble alive longer.  This is like dying a death of a thousand cuts, slow and agonizing.  Just get on with it. The answer is default, bankruptcy, monetary re-organization and massive government and entitlement reforms.  Do that and we can start to grow and innovate again.

Thu, 09/22/2011 - 02:54 | 1695900 ReactionToClose...
ReactionToClosedMinds's picture

we & Europe are different from Japan .... but not totally either .

I would revise your comment to say almost all developed economies face what you sugggest

Creditstaldt collapse ...go read up on it ... maybe better projection than Japan

Thu, 09/22/2011 - 03:26 | 1695952 Sizzurp
Sizzurp's picture

You mean the Kreditanstalt bank collapse in 1931. That was a Rothschild bank in Austria that went down and spawned contagion in the western world. I am not saying it wouldn't have to be carefully coordinated and planned, but reforms are coming by hook or by crook.  Better to embrace the horror, accept it, and get it over with.  Hopefully, we could avoid war, but with each passing year we get weaker and weaker. Soon we might be unable to provide necessary security to ensure an orderly transformation.  Our enemies might have other plans if we cannot enforce our own.

Thu, 09/22/2011 - 02:38 | 1695877 Bastiat009
Bastiat009's picture

It looks like gold is going down and the US$ up after the Fed's twist announcement. Isn't it good? Isn't it what the Fed wanted?

I am not saying I understand the logic. I am not saying I understand why there is a federal reserve. I am not saying that I see how this will put an end to the depression, but the Fed is not helping Wall Street this time, is it?

The question is: who is it helping?

Thu, 09/22/2011 - 03:40 | 1695970 Sizzurp
Sizzurp's picture

Deflation is their worst nightmare.  It means government revenues will collapse pushing us deeper in debt.  States and pensions will go belly up, and the debt gets more expensive to pay down.  No they can't have it, they have made a mistake.  Financial repression is the formula they are trying to follow, which is orderly currency devaluation, and growth as a way to reduce debt.  This ain't it. Worse, it means they are losing market confidence so further interventions may not have the desired effect.  This is not the market reaction they wanted. We may be on the verge of a disorderly melt down to the default scenario.

Thu, 09/22/2011 - 07:18 | 1696134 twotraps
twotraps's picture

very well said, totally agree.  there should be another way to let the pressure off...allow a market mechanism to price it and allow more people to fail and washout their debt.   The problem is that you absolutely cannot use reason, logic, historical precedent or anything to plan for scenarios.   I keep coming back to the fact that the Fed will hang on to control at all cost, even if its a mess.

Thu, 09/22/2011 - 04:35 | 1696007 Mrs Kensington
Mrs Kensington's picture

Yes, I think it is good.  And what seems to be happening is that under enormous pressure from the GOP and the Chinese, Bernanke has finally been brought under control. This will help the people (mortgages) not the banks (QE).  The tone change will be Obama's last gasp message for re-election, all gears into reverse on Wall Street......

By the way, the greed of goldbugs is quite spectacular - after the crazy ramp up this year they are still baying and propagandising for more.  They deserve the fate of Gollum, who, if you recall, fell into a burning chasm of molten lava trying to save, and still holding his "precious" gold ring.

Thu, 09/22/2011 - 06:04 | 1696074 Sathington Willougby
Sathington Willougby's picture

Nyeah

Neither a borrowr nor a lender bee, a goldbug.

Thu, 09/22/2011 - 04:43 | 1696013 DrunkenMonkey
DrunkenMonkey's picture

So, in other words, this statement is a call for le bernankrupt to go and intervene further before June 2012 ?

Thu, 09/22/2011 - 05:09 | 1696036 buzzsaw99
buzzsaw99's picture

...one possibility is that the unconventional move will take more time to digest in markets less familiar with its likely method of action. Indeed, we found in prior work that the equity and foreign exchange markets seemed to lag behind the fixed income market in pricing in asset purchases...

 

This is weak, even by Goldman standards. The implication is that when equity markets realize what a great thing twist is it will respond favorably? That's the spin? Everyone and their dog (even goldie) understands that the stock market has gotten way ahead of itself and was betting on a huge stimulus. Break out Abby Baby bitchez!

Thu, 09/22/2011 - 05:10 | 1696037 oogs66
oogs66's picture

maybe goldman should start reading zerohedge

Thu, 09/22/2011 - 05:16 | 1696041 EZYJET PILOT
EZYJET PILOT's picture

Mrs Kensington, don't be naive. Nothing Bernanke does is for the people. This will do nothing for mortgages, especially with homes already so overvalued. It does help the bankers because part of the twist is to buy MBS, this is the prelude to something much larger in 2012 when we'll see the real ugly QE3.

Thu, 09/22/2011 - 08:19 | 1696310 spanish inquisition
spanish inquisition's picture

Call it for what it is, Operation Market Manipulation to Save the Fed.

Now look at the name and go "shit, they have been doing that for years and it hasn't worked for anyone but the Fed, its owners and distribution system (Wall Street). And some good money for its minions in politics and economic buffoons."

 

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