QE4 (QE Infinity) Scares The Heck Out of Me – 7 Posts


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If you want to understand Quantitative Easing, and what it means, it is worth taking some time to scan these articles. When you consider half of the $85 billion spent by the Fed each month is spent buying MBS to artificially support the housing market, you realize how dangerous it will be when the buying stops.

The Chinese and Japanese stopped buying US Treasury debt. They aren’t stupid. Now the Fed buys the bulk of US Treasury debt as there are not enough buyers. In effect we are buying it from ourselves, the equivalent of money printing. One hand of government washes the other, providing an artificial sense of stability.  Party on. – BC


QE4 Is Here: Bernanke Delivers $85B-A-Month Until Unemployment Falls Below 6.5% – Agustino Fontevecchia, Forbes 

BC comments:
1. Consumer spending pullback in 2008 crash dropped GDP by ~ $1 Trillion/year
2. QE Infinity by Ben to replace lost GDP – approximately $1 Trillion/year
3. Government deficits for foreseeable future – approximately $1 Trillion/year
4. The Fed selling (unwind) all the bonds they bought would depress GDP = Zero odds
5. Odds this will continue until it can’t = 100%

and this from Mike Shedlock at MISH’S Global Economic Trend Analysis   

Exit Strategy? What Exit Strategy?… Recall when the Fed pretended it was working on an exit strategy to reduce its balance sheet at the appropriate time? It was a lie then and it’s an even bigger, more apparent lie now (which is why you no longer hear Bernanke mentioning it) . The simple fact of the matter is that every Fed asset purchase makes it more difficult to exit. When interest rates do start to tick up (which could be a while based on Fed statements), interest on the national debt would soar if the Fed unloaded treasuries. Likewise, mortgage rates would soar if the Fed unloaded agencies at a time interest rates were creeping up. There never was an exit strategy and there never will be one.  … – 


And That’s Checkmate Bernanke – Submitted by Phoenix Capital Research – … So the Fed is flat out lying in its claim that QE will create jobs. There is no evidence that this QE does this. So the Fed is announcing this new program for a different reason. Regardless of the reasons, Ben’s got a major problem on his hands. That problem is the fact that Treasuries are on the verge of breaking their upward sloping trendline. If Treasuries begin to collapse at a time when the Fed is buying up over 70% of debt issuance, then the Great Treasury Bubble is finally about the burst: ... – Zero Hedge

Pimco’s Gross Says Fed Policy Means ‘Free’ Debt for Treasury – By Liz Capo McCormick – … “What really happens, and this is critically important, is that the Treasury issues bonds and the Fed buys them and then it remits interest to the Treasury,” Gross, who runs the $285 billion Total Return Fund, said in an interview on Bloomberg Television with Betty Liu. “It means the Treasury is issuing debt for free. There are complications. Inflation is one of the complications. … “But ultimately, if you write checks for free and if it’s costless to finance a fiscal policy that is well into a deficit figure, yes, that’s an inflationary moment to the extent that the private sector gets some animal spirits and takes that bait.” … – Bloomberg 

(excellent) QE 4: Folks, This Ain’t Normal – What you need to know about the Fed’s latest move – by Chris Martenson – Peak Prosperity Blog 
(written in 2010 very interesting) The Fed Caused Disaster – By Richard J. Maybury – …  The money supply when the Fed began operations in 1914 was $11.6 billion. Today it is $1,695.9 billion 3 —a 145-fold increase. … – US & World Early Warning Report

(savers slowly being robbed) Treasury Yields Below Inflation May Last Years: Chart of the Day – By David Wilson – Investors in Treasury securities will have to get used to yields lower than the U.S. inflation rate, … the so-called real yield on 10-year notes is less than zero for the second consecutive year. That hasn’t occurred since the 1970s, according to data compiled by Yale University Professor Robert J. Shiller. … “Negative real rates will remain in place for at least a decade — and maybe a generation,” Garthwaite, who is based in London, wrote two days ago in a report. … – Bloomberg 


One thought on “QE4 (QE Infinity) Scares The Heck Out of Me – 7 Posts

  1. Pingback: week3 | Mortgage News Clips

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