QE3 looming

pmbug

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Global investors appear convinced more QE is in the pipe.

"It is almost as if investors are saying QE will happen no matter what," said Bank of America Merrill Lynch's Gary Baker.

BoA Merrill's latest monthly survey of 260 fund managers showed nearly three in four expect the ECB to proceed with another liquidity operation by October. Almost half expected the Fed to return to the pumps over the same period.

The BoJ has already upped asset purchases yet again this year and Bank of England policy dove Adam Posen said on Monday the BoE should not only buy more government bonds but target small business loans too.
...
More: http://www.reuters.com/article/2012/06/13/us-economy-qe-idUSBRE85C07220120613
 

DCFusor

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For a trader, it's all still the question of how and in what order. Does Ben bail out the EU with swaps? What's he gonna do for us - other than that maybe affecting us indirectly? The EU seems to be running out of even toilet paper collateral to rehypothecate - we're just outa bullets over there...

Of course, my take could be the result of just reading "Currency wars" by Rickards.
Which I noted had one VERY serious error in the first chapter, sigh, but the rest was good. Maybe I'll find it again and get back later on it, but there's an assumption he makes about gold based currencies that is just dead wrong on the face of it, not that it affects the rest of what he says. But in that error, he calls for nations with a surplus winding up with all the gold, and that being deflationary for them, causing their currency to go up and reducing their competitiveness...not exactly - as he points out at the other end of the book, that's a matter of policy and revaluing the paper.
 

benjamen

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Interesting article:
http://www.fallstreet.com/june2512w.php

"Nearly 5-years since the Fed’s first rate cut - and with the Fed unable to exit any major stimulus scheme - the committee is getting ready to launch QE3?"

'reporters questioning Bernanke ignored the twist almost entirely, instead asking questions like: “if you expect inflation to remain under control and the jobs market is by all accounts weak, why doesn’t the Fed unleash another round of stimulus now?”'

"What if you print trillions of dollars, keep short term interest rates at zero percent, and asset prices still do not listen?"
 

benjamen

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An article discussing if the FED's QE has hurting or helping the financial crisis:
http://finance.yahoo.com/blogs/dail...ndering-economic-recovery-john-142724551.html

Favorite quote of the day:
"Imports are beautiful, it is poor countries that don't import," he says. "If devaluation or a weak currency were the path to prosperity then countries like Argentina and Zimbabwe and Turkey would be among the richest in the world."

:judge::clap:
 

pmbug

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As I predicted, as far back as June of 2010, the Fed will soon follow the strategy of ceasing to pay interest on excess reserves. Since October 2008, the Fed has been paying interest (25 bps) on commercial bank deposits held with the central bank. But because of Bernanke's fears of deflation, he will eventually opt to do whatever it takes to get the money supply to increase.

With rates already at zero percent and the Fed's balance sheet already at an unprecedented and intractable level, the next logical step in Bernanke’s mind is to remove the impetus on the part of banks to keep their excess reserves laying fallow at the Fed. Heck, he may even charge interest on these deposits in order to guarantee that banks will find a way to get that money out the door.

The move would be much more politically tenable than to increase the Fed’s balance sheet yet further, most likely because people don’t understand the inflationary impact it would have. Ceasing to pay interest on excess reserves would allow the Fed to lower the value of the dollar and vastly increase the amount of loan creation, without the Fed having to create one new dollar.

If commercial banks stop getting paid to keep on their dormant money at the Fed, they will surely find somebody to make a loan to. They may even start shoving loans out through the drive-up window with a lollipop. Banks need to make money on their deposits (liabilities).

If banks no longer get paid by the Fed, they will be forced to take a chance on loans to consumers, at the exact time when they should be getting rid of their existing debt. But it has already been made very clear to them that the government stands ready to bail out banks. So in reality, they don’t have to worry very much at all about once again making loans to people that can’t pay them back.

Commercial banks currently hold $1.42 trillion worth of excess reserves with the central bank. If that money were to be suddenly released, it could, through the fractional reserve system, have the potential to increase the money supply north of $15 trillion! As silly as that sounds, I still hear prominent economists like Jeremy Siegel calling for just such action. ...
http://kingworldnews.com/kingworldn...Move_Is_About_To_Cause_Gold_To_Skyrocket.html

Would they really unleash the Kraken?

 

benjamen

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benjamen

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IMF thinks the FED isn't doing nearly enough:
http://whiskeyandgunpowder.com/report-from-an-underwater-wasteland/

"Ben Bernanke’s printing press is collecting dust, she thinks, and legions in Washington have stayed home to escape this summer’s uncomfortable climate change. There’s not enough QEs and Twists to suit Lagarde. Not enough red, white and blue government programs for the IMF brass. Striking an Independence Day theme, Lagarde is hoping for more government “firepower” in the good old U.S. of A."

:flushed:
 

bushi

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like i said before, it is not 'if', it is 'when'. All kinds of QEs and money drops are inevitable. Why: 'the debt that cannot be repaid, will not be repaid'. the choice is between going default, or printing your way out (destroying/damaging the currency in the process). Easy choice if you are the one who needs to be reelected , and have command over the printing press

Sent from my NookColor using Tapatalk 2
 

swissaustrian

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As I said in another thread, the market is in full QE-on mode thanks to the weak employment data.
If the FED doesn't deliver next Thursday, watch out for violent selloffs in stocks, bonds, pms, EUR/USD. Basicly in everything.
Expectations are sky high right now. That's always very dangerous.
I'm sure they don't want a crash before the election, but they also don't want to look like election riggers for Obomber. The GOP would attack the FED massively.
The FED is basicly doomed if they don't act, and doomed if they do act.
Anyway, I'd be very cautious right now as an investor.
 

ancona

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I think that 1 dollar one second spike in silver might mean someone overheard the Bernank this morning.
 

swissaustrian

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Ok, so the FED acted. The 40bn monthly MBS purchases isn't a huge amount, but it seems they might enhance the volume after the election.
More interesting, however, is that it is an open ended program. So it's QE to infinity like the great Jim Sinclair had been predicting for quite a while.
Bernanke said during his press conference that the FED wouldn't raise rates immediately after the "recovery" started. For him this obviously means significantly lower unemployment rates. This isn't going to happen anytime soon, because we have an abundance of cheap (slave) labor on a global scale, so US workers are going to stay completely uncompetitive for a longer period of time. Back to his statement about rates: Keynesian economic theory teaches that "recoveries" don't come without inflation. If they are artificially created by cheap credit, this is true. Bernanke therefore said that he is willing to risk inflation rates significantly above the FED's (phony) 2% target. That is a significat development. He actually even demonstrated this will to risk higher inflation by completely ignoring the already high US gasoline prices in his statements which I expect to rise even more under the new QE policy.
 

jerrylawler258

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Back to the good news, QE3 will fail, and it will because money creation for the sake of money creation, and bond buying meant to prop up Washington and mortgages, is by definition an economic retardant for it signaling an economy moving backwards into the horrid concepts of the past. QE3's failure will happily mean the end of Ben Bernanke's very unfortunate reign at the Fed; the only question at this point one of whether President Obama will remove him in order to save his faltering presidency, or whether a President Romney will remove him in order to have a shot at a successful one.
http://www.realclearmarkets.com/art...ilure_means_bens_days_are_numbered_99787.html
 
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benjamen

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Somebody drank the koolaid:
http://www.bloomberg.com/news/2012-09-13/with-qe3-we-all-win-poor-and-rich-alike.html

"The great thing about good policy is that it is a positive-sum game. A Fed that credibly promises to ease until unemployment falls will both put people back to work and grow the economy faster, driving up stock prices. That's a win for capital, a win for labor and, if he gets credit for an accelerated recovery, a win for Ben Bernanke. As Michael Scott might say, it's a win-win-win."

:rotflmbo::rotflmbo::rotflmbo::rotflmbo:
:noevil:
 

pmbug

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From Benjamen's link:
The Federal Reserve could expand its stimulus package to include assets other than mortgage-backed securities if the U.S. economy fails to respond to its latest effort to jump-start the economy.

“Unlike our past asset-purchase programs, this one doesn’t have a preset expiration date,” said San Francisco Fed President John Williams at a speech at the City Club on Monday. “Instead, it is explicitly linked to what happens with the economy.”

At its monetary-policy meeting on Sept. 13, the U.S. central bank said it would buy $40 billion worth of mortgage-backed securities per month as part of a stimulus plan colloquially known as QE3 — for Round 3 of quantitative easing.

“We might even expand our purchases to include other assets,” he said.

While the Fed is limited to what it can hold on its books, it can increase purchases of U.S. Treasurys, mortgage-backed securities, and debt issued by agencies such as Freddie Mac and Fannie Mac, Williams said.
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So they are threatening to buy government debt directly now?
 

benjamen

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From Benjamen's link:

So they are threatening to buy government debt directly now?
I thought this section was enlightening:

"He also suggested that the Fed could extend Operation Twist beyond the end of the year, when it is due to expire, and continue buying longer-term Treasurys if the economic recovery does not make substantial progress."

If the economcy (private business) does not improve, we will continue buying government debt....
:noevil:
 

bushi

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Is "buying government debt" different technical term from "monetizing the national debt"? Because if these are equivalent, then Fed is already doing that on a quite a massive scale, AFAIK (have seen the articles, pointing out that in some auctions Fed is buying about 60% of bonds issued by US Treasury (..but rest assured, the demand is strong for US bonds, everybody!) - that means, if I am not mistaken, that for every one $ that US govt spends, 40c of which is borrowed, and thus roughly 25c is being created on the Fed's balance sheet (60% of borrowed 40%) ). Speaking of depreciating currencies - just look how much money US govt spends, and realize that nearly a quarter of that is created by the magic of Fed money creation :).
 
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