QE2 (Not the ship) just around the corner, no thoughts from EJ?

[Mega]

http://www.zerohedge.com/article/jim...-around-corner

Must confess i find it strange that EJ is making no coment on this......i mean the FED needs +$5 Trillion & they are centre bankers thus they print. They can't quite do "Its our currancy but your problem" of the 1970's because China would kick off....

So, we sure they going to print i mean Obama is very much a "Jimmy Carter" now.........so why not?

Mike

[Mega]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

Update!
http://www.telegraph.co.uk/finance/c...-tumbling.html
Mike

[Slimprofits]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

http://www.reuters.com/article/idUSN1525394820100716

Lacker says Fed can ease further if growth stumbles

[we_are_toast]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

I'm still very unclear how the FED can do any meaningful QE. The Government isn't going to be running bigger deficits (not politically possible for some time), All the real junk MBS have already been bought, they might be able to buy some munis but not much, and there probably isn't a lot of new junk being issued, and buying junk doesn't assure the money will circulate. So unless you've got a conspiracy theory about the FED having off shore accounts to buy stocks, I just don't see how they do it. Bens helicopter was dependent on the Gov putting fuel in it, and now I don't know where he's going to get the fuel.

[ASH]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

I'm still very unclear how the FED can do any meaningful QE. The Government isn't going to be running bigger deficits (not politically possible for some time), All the real junk MBS have already been bought, they might be able to buy some munis but not much, and there probably isn't a lot of new junk being issued, and buying junk doesn't assure the money will circulate. So unless you've got a conspiracy theory about the FED having off shore accounts to buy stocks, I just don't see how they do it. Bens helicopter was dependent on the Gov putting fuel in it, and now I don't know where he's going to get the fuel.

There are always Treasuries for sale on the open market; the Fed doesn't have to purchase new issues. Also, even if the government doesn't run a "bigger" deficit, the current deficit is certainly "big enough" to keep new issues flowing without any political decision to expand the deficit. I don't think there's any question about the Fed not being able to do any meaningful QE -- from a mechanical standpoint, it can. The key issue, in my opinion, is what those who sell Treasuries to the Fed end up doing with their reserves, and what holders and regular buyers of Treasuries do in response to more QE.

[metalman]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

http://www.zerohedge.com/article/jim...-around-corner

Must confess i find it strange that EJ is making no coment on this......i mean the FED needs +$5 Trillion & they are centre bankers thus they print. They can't quite do "Its our currancy but your problem" of the 1970's because China would kick off....

So, we sure they going to print i mean Obama is very much a "Jimmy Carter" now.........so why not?

Mike

hmmmm... ej not talking about qe again & 'deflation' again because old news is old again?

alzheimers debate club topic replay... 'Financial Times: Fed picks EJ's kind of debt deflation'

or post to 'ask ej'?

[sunskyfan]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

The key issue, in my opinion, is what those who sell Treasuries to the Fed end up doing with their reserves, and what holders and regular buyers of Treasuries do in response to more QE.

I agree. I keep hearing that corporations are sitting on $1.8 Trillion they don't want to spend. Something is wrong. That could be $10 Trillion leveraged! My guess is that we have reached a double bind. The government has put in supports to keep assets from truly correcting and is also not aggressively forcing defaults on real estate to keep a true correction from happening there. Can this go on forever? If no then why would anybody take on more liability until it does? If yes, where is he profit in moving my money from its current position? What is the opposite of an arbitrage?

[Mega]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

Update:-
"And here’s the big difference. Instead of buying US Treasuries on an unsterilised basis — which was the method of the Fed’s last bout of QEasing — this time around, the central bank would sterilise.

And the benefits, Konstam says, would be myriad:"



Typically the Fed manages short rates with an eye on long-term risk premia, primarily reflecting inflation risk. The Greek problem is an example where markets can quickly lead the process and plunge the economy into an enforced deflation. The danger is that US fiscal dynamics are not particularly good either, absent a strong recovery so that risk premia could rise once the dust settles on the initial flight to quality. This would be exacerbated if for example the Administration considered more fiscal stimulus.

QE in these circumstances could be sterilized via reverse repos, term deposits or effectively neutralized by raising interest on reserves. The result would be a substantial twist of the yield curve. Mid-2011 2s might be around 1 ½ percent with a policy rate of, say, 1 percent, but 10s could be 2 ½ to 3 percent. Sterilization would be a way to placate the hawks. Net there is no new monetary stimulus via the Fed’s balance sheet. Yet there is a removal of unwarranted risk premia in return for a delay in fiscal consolidation. Some might welcome higher short rates if it helped reduced precautionary money balances (velocity rises). This is of course more likely if growth is stronger – but with an outlook that is still highly uncertain.

Foreign investors hold around half of the Treasuries outstanding. Ultimately they are the marginal pricers of risk premia. Given their concern for euro periphery financing, it is reasonable to assume they will be among the first to expect appropriate fiscal consolidation if and when downside economic risks abate. The beauty of sterilized QE is that they would be pushed to purchase shorter-term Treasuries as the Fed purchased longer-term Treasuries. To the extent that they are comfortable with low inflation in the short term, but fear long-term inflation risk, this is appropriate and a stable outcome. It allows them to revalue their currencies on that horizon too. The alternative would be to revalue more rapidly and obviate the need to invest in dollars altogether . . .

It is too early to say whether Fed policy will embrace the possibility of sterilized QE to contain long-end risk premia. And perhaps it may not need to if markets are “well behaved”. However, the powerful logic is that unless there is a very strong recovery that allows more rapid fiscal consolidation, either markets need to behave and maintain low long rates or the Fed will need to threaten sterilized QE. It suggests that over the medium term as well as the short term, yield curves are prone to be sustainably flatter.

Finally there is also a certain neat logic to policymakers standing up to free markets. First with regulatory reform and maybe, second, with a greater use of central bank balance sheets to dictate interest rates.

[Mega]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

My point is this time around they will HAVE to allow it "In to" the system........Sterilzed money will do nothing for them.....They just mark time & the US grows ever weaker as time go's on.
Mike

[we_are_toast]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

My point is this time around they will HAVE to allow it "In to" the system........Sterilzed money will do nothing for them.....They just mark time & the US grows ever weaker as time go's on.
Mike

Very good point! The Sterilized money doesn't do it. So how, and where, does the FED want the NEW money to go in the economy?

There are always Treasuries for sale on the open market; the Fed doesn't have to purchase new issues.

This will get the money into the economy, but where is the starting point? Whoever owns tons of bonds. By buying new Treasuries, the government can build roads, give unemployment, create a jobs programs ... By giving it to big bond holders, you're basically hoping for trickle down, and right now the wealthy aren't spending, so it doesn't help much. Worse yet, a good chunk goes to the stock market. If the FED buys bonds from foreign Gov. holdings, it can solve a foreign reserve currency problem, but again, it doesn't seem to help kick the U.S. economy.

I know the prevailing opinion is the FED will simply do it, but I would feel a lot more comfortable if I could see a path of dollars from the printing press to J6pack.

[mmr]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

One of the biggest reasons for the corporate cash buildup is that many corporations have basically decided to self-fund, especially after late 2008 when large parts of the wholesale funding market locked up. While the return on cash is near-zero, holding cash is a lower-risk strategy than relying on banks or the commercial paper market if another panic hits and those funding sources are no longer available.

Keep in mind that the Fed isn't limited to QE through securities purchases - the Maiden Lane (Bear Stearns / AIG) structures basically allowed the Fed to buy whole loans (technically they're lending to an off-balance sheet vehicle that holds loans, which has the same effect as if they bought loans directly). Using that strategy, the Fed could conceivably buy bad commercial real estate loans from banks at "par" if they were desperate enough to prop up asset values.

Ireland just tried a somewhat similar stunt ("NAMA") with bad CRE loans in their banking system, although they don't have their own unaccountable central bank, and so the EU forced them to buy the loans at a discount rather than at full value.

Basically, the Fed has the tools at its disposal to prop up nominal real estate and financial asset prices indefinitely unless politicians intervene.

[c1ue]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

Basically, the Fed has the tools at its disposal to prop up nominal real estate and financial asset prices indefinitely unless politicians intervene.

Or the other dollars stakeholders - all those foreign nations/CBs with US dollar assets - quit the party in disgust and take their marbles home.

[sunskyfan]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

Basically, the Fed has the tools at its disposal to prop up nominal real estate and financial asset prices indefinitely unless politicians intervene.

So let's see. I wonder how long this could continue when the unemployed and hungry are walking past empty condos with for sale signs on them at $350 per square feet or nearly all the business real estate vacant. There are three empty condos buildings within a two miles of where I live right now plus lots of vacant business space. Still sounds like great depression but boy we made sure to save Wells Fargo and Goldman.

[doom&gloom]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

Eric Sprott on King World News interview notes the Fed has YET to stop the original QE, as thier balance sheet has shown a slow and steady expansion every month.

When will the Fed strafe the "real" economy? I think it would take some form of tax cuts, something this administration is loath to do, coupled with more bond purchases by the Fed, to get money into the hands of consumers. Who would, of course, but cheap chinese crap and send th money mostly offshore. Even if they did something so US-targeted as food coupons for everyone, eventually much of that money would shift offshore yet again. How to get money into the system and keep it flushing around over and over again instead of being saved? Gonna have to be some massive inflaton to drive people to do that.

[aaron]

Re: QE2 (Not the ship) just around the corner, no thoughts from EJ?

George Bush had the right idea. Send a check to every American. However, this time the FED should do it. Debit cards might be even better if we really want people to "spend" the money into the economy, instead of paying down debt. But, I do not think the FED has this power.

Or, we could eliminate taxes on the middle & working class and increase capital gains taxes to compensate. The FED could buy the bonds. "Rebuild America" bonds sold by the Treasury, purchased by the FED.

Massive mortgage debt elimination ==> The government owns/supports much of the mortgage market. This should make it relatively easy --> Decree that all mortgages are now HALF what they were (justify it by all those wall street fucks creating an imaginary bubble that "hard working" Americans should not have to pay for). At the same time, decree that foreclosures over the past few years should not count against one's credit rating. This should help in eliminating the housing overhang and keep people from yelling "unfair".

Our Foreign creditors should not scream too loudly since, as you say, we will buy a bunch of Chinese crap. In fact, America might be a nice place to invest in again if we are all not so damn broke.