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Thread: Current Fed Policy - For how long ?

  1. #176
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    Default Re: Current Fed Policy - For how long ?

    Bank of America just came out with this analysis ... from http://www.zerohedge.com/news/bofa-s...-and-190-crude


    (snip)"Bank of America's Priya Misra has just released an analysis which is identical to ours in all other respects, except for when the latest QE version would end. BofA's take: "We do not believe there will be “substantial” improvement in the labor market for the next 1.5-2 years and foresee the Fed buying Treasuries after the end of Operation Twist." What does this mean for total Fed purchases? Again, simple. Add $1 trillion to the Zero Hedge total of $4TRN. In other words, Bank of America just predicted at least 2 years and change of constant monetization, which would send the Fed's balance sheet to grand total of just over $5,000,000,000,000 as the Fed adds another $2.2 trillion MBS and Treasury notional to the current total of $2.8 trillion. "(snip)

    (snip)"Or, in terms of US GDP, the Fed's balance sheet will have "LBOed" just shy of 30% of all US goods and services.

    It gets worse:

    Since the Fed is effectively becoming the marginal player in both the MBS and Treasury markets, a very relevant question is how much private market debt is left to sell. Short answer: not much. According to BofA's calculation, the Fed will own more than 33% of the entire mortgage market by 2014.

    That's half the story.

    On the Treasury side, in just over 2 years, "Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014." You read that right: in just over 2 years, the Federal Reserve will hold two thirds of the entire bond market with a maturity over 5 years (which by then will be part of the Fed's ZIRP commitment, yield 0% and essentially be equivalent to cash).

    No wonder that David Rosenberg is worried that the Fed will soon run out of securities to buy (well, there are always equities of course, but the Fed will not monetize those until some time in 2015 when hyperinflation is raging).

    And speaking of hyperinflation (and our earlier note that nothing "else is equal") the real question is if indeed the Fed will own $5 trillion in "assets" in 27.5 months, what does that mean for gold and crude? The answer is plotted below:



    In case it is unclear, the answer is:

    •$3350 gold
    •$190 oil.

    Luckily the Fed has already factored all these soaring input costs (and "alternative money" prices) in its models, and there is nothing to worry about. Lest we forget, the Fed can crush inflation cold in 15 minutes cold... somehow. Even when unwinding its balance sheet would mean sacrificing 30% of US GDP and, let's be honest about it, civil war. "(snip)

  2. #177
    God/dess Eric Stoner's Avatar
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    Default Re: Current Fed Policy - For how long ?

    Quote Originally Posted by Melonie View Post
    ^^^ please don't even think it ( a rush out of the US dollar ) !!! Arguably, Bernanke is taking a calculated risk that he can help America very gradually 'stiff' her creditors ( i.e. China, Japan, Saudi etc. ) via very gradual US dollar devaluation, without precipitating 'dumping' of too many of the US dollars currently held by those creditors. I suppose this is analogous to the famous 'slowly boiling the frog' ... as long as Ben can prevent the Chinese / Japanese / Saudi 'frog' from jumping out of the pot ...
    Obviously Ben wants to keep those frogs in the pot until it is too late.

    Generally I agree with Milton Friedman who long advocated replacing the Fed with a computer programmed to print that amount of money necessary to increase the money supply by about 2 % a year.

    The Fed has two missions : 1. Maintain our currency as a store of value and 2. maintain employment. By trying to do the latter it is failing in its primary mission. Worse yet, it has crossed over from monetary policy to fiscal policy where it does NOT belong at all. That ought to be the sole purview of Congress and the Prez. Huh ? What ? "Eric, how is the Fed messing around with fiscal policy ? " Simple. By buying up U.S. debt and enabling spendthrift spending. In addition the Fed is assuring that an enormous part of our Federal budget goes to pay interest on all that debt.

    I would argue that if the Fed had focused on its primary mission and maintained the value of our currency it would have done more to promote employment than all of its "twists" and "easings".
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    It is a common sense that gold is very percious and now more and more people like the gold metal, and more and more people now join ge group of hunting for treasure and gold. This is like the "gold rush". But what is different form before is that now people use more advanced equippmemt to help them to find the gold. And it seems among different equippments, people like the gold metal detectors most, because that such a device can help them to identify the detail information of the metal so that people can find it in a short time.

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    Default Re: Current Fed Policy - For how long ?

    ^^^ while recent 'prospecting' efforts have indeed increased, from a real world prospective more gold was 'lost' to world supply due to this week's South African miner's strike than will be added back by a full year's worth of all of the shipwreck salvage and new Arctic gold 'prospecting' efforts combined.

  5. #180
    God/dess Eric Stoner's Avatar
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    Default Re: Current Fed Policy - For how long ?

    There is a BIG difference between linking Fed policy to gold and backing our currency with gold. I favor the former and oppose the latter. It is tempting I know to wish for a return to the gold standard. However the gold standard comes with its own set of problems and it was one of the prime causes of the Great Depression.

    It is far better I submit ( and I am joined in this by a LOT of prominent folks with more experience and expertise than I ) to link our currency to the price of gold i.e. to let gold help set its value. Or we can use a "basket of commodities" including gold to do the same thing. The object is the same i.e. to control and prevent wild expansions ( or even contractions ) in our money supply. If nothing else it would refocus the Fed on its prime mission which is to maintain the value of our money.
    Last edited by Eric Stoner; 09-28-2012 at 11:17 AM.
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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    Default Re: Current Fed Policy - For how long ?

    There are many types of detectors in the market, so it is really hard to make a decision which one to buy and whee to buy. I searched the internet for a long time and then I bought a metal detector, which is really helpful. And when I do metal detecting outside it can really distinguish what kind of the metal that it has detected and give an indication for me. And by using such kind of device I have saved a lot of time and energy. In a word, I love the gold metal detector and have confidence in it.
    Last edited by jammerchell; 10-05-2012 at 03:11 AM. Reason: s

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    Default Re: Current Fed Policy - For how long ?

    In your opinion, what can the gold metal detectors help you? In fact, on one hand it can help you to make your road of treasure hunting more fluently and bring you more surprise. Besides on the other hand it can also help people in other fields and aspects. For example by using the gold metal detector the archologist can know the position of the metal items more clearly so that they wonn't do damaged to teh treasures when they do the digging. And in your daily life if you lost your ring and other metal items. The gold metal detectors can also help you to find it. Really useful, doesn't it?

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    Default Re: Current Fed Policy - For how long ?

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  9. #184
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    Default Re: Current Fed Policy - For how long ?

    the FED 'gravy train' for the too big to fail banks a.k.a. 'Primary Dealers' continues ...


    (snip)"The Fed today elected to print an additional $45 billion a month via outright purchases of Treasuries. That’s in addition to the printing of $40 billion a month via MBS purchases that it is already doing. It will also continue to reinvest the proceeds of maturing MBS. That’s been running at $35-$40 billion per month. At that rate the Fed will be pumping at least $120 billion per month into the trading accounts of the Primary Dealers. This total is as high as during QE 1 in 2009. The dealers will use the cash to purchase more Treasuries, which will partly fund the Treasury debt. Other buyers will continue to fund the rest.

    The dealers will also deploy the cash in other trades, including some MBS purchases in addition to the Treasury purchases, but also purchases of equities and commodities.

    The Fed has created a Catch 22 for itself by tying the Fed Funds rate to “expected” inflation. Its language was as follows.


    In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal…


    The Fed published a table and charts summarizing the economic projections and the target federal funds rate projections made by Federal Reserve Board members and Federal Reserve Bank presidents for the December 11-12 meeting of the Committee. I assume that the inflation contingency is based on these projections. The FOMC and district presidents saw no likelihood of inflation reaching beyond 2%. Not now. Not ever. Let me say that again, just to make sure it’s not a typo. The Fed governors and bank presidents didn’t see inflation surpassing 2%, EVER. Projections materials (PDF)

    But what if, as I think highly likely, commodity prices surge as a result of this new round of money printing. Normally, in the short run, commodity price rises do not filter into the inflation measures which the Fed watches. Commodity price inflation could rage without pushing the PCE and core PCE to anywhere near the 2.5% threshold the Fed has set.

    That has the potential to wreak havoc in the economy without raising employment levels at all. Manufacturers, middlemen and consumers would be squeezed by rising food and energy costs well before the Fed had any inkling of an increase in the tortoise like PCE measures. The cost squeeze would force consumers to cut back on spending, and manufactures, distributors and retailers to cut back on employment. Inflation would stop economic growth in its tracks, all the while the Fed is peering into its crystal balls a year or two ahead and seeing no inflation.

    Then, as the economy ground to a halt, what would the Fed do? Stop QE because commodity inflation was crushing the economy? At that point that would run the risk of exacerbating the contraction. Print even more money, driving commodities up even faster? In truth, if commodities do go into bull mode, the Fed would seem to have no way out.

    With the expansion of QE, the Fed has created a potential nightmare scenario, one that I think is all too likely."(snip)

    from http://www.testosteronepit.com/home/...s-trololo.html

  10. #185
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    Default Re: Current Fed Policy - For how long ?

    More proof that the Fed does not have a clue what it is doing :The Fed has consistently signaled that it will continue to raise interest rates but NOBODY has any idea WHY. The economy is still very weak. One theory pushed by John Crudele and a few others is that the Fed is raising rates so that it can lower them when the economy gets into real trouble further down the line. A related theory is that the Fed is raising rates out of concern for "irrational exuberance " in the stock market.

    In her latest Congressional testimony, Janet Yellen said that rates won't necessarily rise if inflation does not go up. Inflation goes up when the economy is doing well so some analysts are worried that if we get anything resembling healthy economic growth ( 3 % , 4 % ) the Fed will raise rates. The point is that her recent testimony represents a 180 degree turn from what she has been saying for years. She hinted at rate increases ; then signaled and finally did raise rates. And said that she would continue to do so.

    Wall Street must have liked what they heard because the Dow hit yet another record after her latest pronouncements.
    Last edited by Eric Stoner; 07-17-2017 at 11:41 AM.
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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