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With today's Fed announcement of $600 billion more in Quantitative Easing purchases, the United States has officially entered "Stage II" of the crisis.
This $600 billion is in addition to the purchases already underway using the proceeds from the maturation of their massive MBS portfolio.
Goodbye dollar; hello future.
Here's the relevant wording from the statement:
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.
The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings.
In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.
The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
(Source)
Left unsaid here is exactly why the "pace of recovery" needs to be stronger. According to the BEA and the Census Bureau, the GDP and retail sales are up quite handily. The NAR says that existing home sales are picking up. Auto sales are coming in stronger.
Without the Fed being open about the true source of its concerns, we are left to speculate.
Whatever could be on their minds? Could it be:
- Is a Commercial Real Estate nightmare lurking in the shadows that could harm more than a few banks?
- Have certain foreign purchasers of US debt gone missing from the auctions?
- Are tax receipts at the federal level below expectations?
- Are banks more wounded than we've been told?
All we have at this point is uncertainty.
In the meantime, the information coming from China and India about growth and inflation have to be giving them fits...if the OECD doesn't get itself up off the mat and back into the game, it risks being left behind on the final leg of the World Resource Race Twenty-Teen Open Invitational.
At any rate, the Fed is now openly pursuing a policy of outright debt monetization and funding of excess and excessive government spending. That's a game changer.
Welcome to the future. It has finally arrived.
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Looks like the FED was spot on with producing a statement in-line with market expectations (which is no suprise, since they flat out asked the market what they wanted). The FED's actions don't move markets any more... It will be other government's reaction to our FED's actions that WILL move markets over the next few weeks.
Cheap Bank Credit inoculations. The elixir that sickens the economy is apparently also the cure. Some are of the belief that if only the politicians themselves are in charge of inoculations, the patient will finally be well. (Think FEMA)
Carl
As Chris noted, we are left to speculate on what the Fed's real concerns and motives are.
a. Why did the Fed so openingly talk up Quantitative Easing recently?
b. Why is the Fed apparently going to actually do this?
c. Is there a potential future adverse event unknown to us the Fed is trying to mitigate or was their intent to produce a market effect at present?
d. For our personal preparations, what effects of this monetization should we expect to be impacted by, regardless of the Fed's intentions?
Don't the folks at the Fed get it?
Short term fix for long term disaster...holy cow!
Jeff
"If the American people ever allow private banks to control the issue of their currency...the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." Thomas Jefferson 1802
*tinfoil*
I've had a suspicion for a while that the Fed isn't going to make it to 2013... almost as if it was planned this way...
http://sas.rutgers.edu/news-a-events/achievements/1065-michael-bordo-and-the-federal-reserve-systems-centennial
https://mises.org/Community/forums/p/20752/376574.aspx
What with Mervyn Baggins proposing the end of Fractional Reserve Banking... strange days...
http://www.youtube.com/watch?v=CLcUS9c9Kbo
Or
Or, my favorite -
Haven't I been saying this for over a year now?!? But everyone said "Conspiracy Theory!"!
Bottom line: This IS the plan. The Fed will be the scapegoat. They'll use this to create their solution...the one world currency.
What will you say when my "CT" comes to fruition? It IS coming......Mark my words.
*tinfoil*
I've had a suspicion for a while that the Fed isn't going to make it to 2013... almost as if it was planned this way...
http://sas.rutgers.edu/news-a-events/achievements/1065-michael-bordo-and-the-federal-reserve-systems-centennial
https://mises.org/Community/forums/p/20752/376574.aspx
What with Mervyn Baggins proposing the end of Fractional Reserve Banking... strange days...
http://www.youtube.com/watch?v=CLcUS9c9Kbo
User's posting privileges have been suspended.
LR
Will they use a created crash of the dollar to accomplish what you expect to happen?
And in what approximate time frame...1year, 3yrs, 5yrs, etc.
Without the Fed being open about the true source of its concerns, we are left to speculate.
Whatever could be on their minds? Could it be:
What about the specter of deflation? I’m told that is the bogyman the Fed fears most. Or is that covered under commercial real estate and failing banks? What other factors affecting deflation could the Fed know about that we don’t?
Can anyone enlighten me?
Travlin
You can always trust your government -- to do anything necessary to preserve itself. Travlin
Macro2682 remarked "the FED was spot on with producing a statement"
That was my first reaction too. But on further reflection, it ocurred to me that the markets were probably manipulated today by the likes of "Girlfriend Goldman" to foster exactly my initial sentiment. The fireworks may start tomorrow when the finger can be pointed at something like the initial claims or some earnings report that misses estimates.
I'm laying my money that the Treasury auctions have been busting each week, as foreigners are getting out of Treasuries. Just a hunch, but I sure would buy something besides US Treasuries if I were running a sovereign fund.