Fed starts printing press: $1T+ in additional purchases

[WildspitzE]

Re: Fed starts printing press: $1T+ in additional purchases

I urge some caution with the Cumberland labeling. While its true that the $268+ billion is indeed MBSs, it also actually directly affects the System Open Market Account Balance which is now approaching the pre crisis peak.

Werd, more gunpowder to add to the other "accounts" on its balance sheet.

[due_indigence]

Re: Fed starts printing press: $1T+ in additional purchases

Forgetting the 'valence' of this week's Fed action for a moment (i.e. the inflationary camp vs the jump-start the economy camp), was anyone else struck by how anti-climactically it was all received? This was the fabled last bullet, the nuclear option, pick your metaphoric poison. And a whole lotta not much happened. It's like the Wizard of Oz pressed the red button forgetting there was a tear in the the control room curtain and we could all see his *** poking through. The Fed's power was illusory and symbolic even at its zenith. Remember Greenspeak? There was a kid in Peoria saying 'mommy that man isn't saying anything' before all the adults in the crowd told him to hush up and mind his elders. Well you know that Greenspan..he wasn't saying anything --and he's all but admitted it in recent weeks. The kid was right. Let's find him and make him President 'cause Hoover Jr. ain't gonna do it.

As soon as people notice the grease paint and sense a deperate actor, the string becomes harder to push on. They're always pushing on a string, except now you can really see them sweating. Apart from some almost-obligatory commodity moves, the markets seem to be calling the CB bluff. We are rotating out of CB's into...something else.

[metalman]

Re: Fed starts printing press: $1T+ in additional purchases

Forgetting the 'valence' of this week's Fed action for a moment (i.e. the inflationary camp vs the jump-start the economy camp), was anyone else struck by how anti-climactically it was all received? This was the fabled last bullet, the nuclear option, pick your metaphoric poison. And a whole lotta not much happened. It's like the Wizard of Oz pressed the red button forgetting there was a tear in the the control room curtain and we could all see his *** poking through. The Fed's power was illusory and symbolic even at its zenith. Remember Greenspeak? There was a kid in Peoria saying 'mommy that man isn't saying anything' before all the adults in the crowd told him to hush up and mind his elders. Well you know that Greenspan..he wasn't saying anything --and he's all but admitted it in recent weeks. The kid was right. Let's find him and make him President 'cause Hoover Jr. ain't gonna do it.

As soon as people notice the grease paint and sense a deperate actor, the string becomes harder to push on. They're always pushing on a string, except now you can really see them sweating. Apart from some almost-obligatory commodity moves, the markets seem to be calling the CB bluff. We are rotating out of CB's into...something else.

dude... they're cretins. you're supposed to think they're smart and you're stupid. else the jackass fire racket doesn't work.

btw, whatever happened to jackass?



oh... lost in the fire econ entertainment/mil/fire/etc complex.

[Supercilious]

Re: Fed starts printing press: $1T+ in additional purchases

Originally Posted by ASH
Regarding the Treasury bonds -- my understanding is that the identity of the seller doesn't particularly matter. The Fed's purchases should create extra demand for the T bonds in the market, allowing the Treasury to raise more money by selling bonds into the market. The Fed normally buys T bonds as part of its routine "open market operations" if they desire to increase the supply of reserves in the system, and thereby lower the overnight lending rate for those reserves. However, since the system is chock full of reserves already (and the overnight rate is right around zero), the point of further monetization is not to manipulate the availability of reserves but rather to provide demand for the bonds that the Treasury needs to issue to finance our big federal deficit, and possibly to manipulate exchange rates and inflation/deflation expectations. That's why this action is being announced as something separate from the routine open market operations that go on all the time. Will it pay for the stimulus? We're talking $300B so far out of a total projected deficit of $1.75T this year, so it'll pay for part of it, but not all. What maturity? Their statement didn't say, but I assume "long" means 10-year and longer.

That's basically it, although I'll quibble with the statement about open market operations and reserves. I think you know it, but just in case and to clarify for others, open market operations have many more purposes than just influencing reserves.

Other nuances - the $300 billion will bring the System Open Market Account balance back to over its prior all time high of $786 billion in mid 2007, and it will also help offset the drop in Treasury purchases by other countries. Lastly, there is no legal limit to how many Treasuries the Fed can buy.

Bart, I believe it would be great if you could open a thread called "H4.1 and Fed financial magic for dummies". There are so many interesting to discuss and so many people are intimidated about looking to that balance sheet. Extremely simple things can appear very complicated and intimidating.

Just a simple question such as: What is the Fed using to buy treasuries? , would deserve a few good messages. I'm not sure myself I understand exactly what is happening in Fed's Kitchen and I think many iTulipers would love to read a beginner's guide on what exactly is happening there.
If I knew more about this subject I would open myself that thread, but I wouldn't be able anyway to illustrate it with such nice charts as you make ...

So, respectfully ,.... Pleaaase!

[cjppjc]

Re: Fed starts printing press: $1T+ in additional purchases

dude... they're cretins. you're supposed to think they're smart and you're stupid. else the jackass fire racket doesn't work.

btw, whatever happened to jackass?



oh... lost in the fire econ entertainment/mil/fire/etc complex.

Metal: There is no way he did that jump without wires.

[loweyecue]

Re: Fed starts printing press: $1T+ in additional purchases

Here's how the system is supposed to work:

1. The Treasury creates a bond
2. The Fed helps orchestrate the sale of the bond to the public and international investors
3. In the aftermarket, the Fed buys and sells bonds through the FOMC. When they buy bonds, they are creating new money. When they sell them, money is destroyed.
4. The Fed's buying and selling of bonds changes the amount of bank reserves in the economy. Since banks can theoretically only create new loans based on their available reserves, the Fed's actions indirectly impact interest rates.

So the Fed doesn't loan money directly to the Treasury, but they do so indirectly. I haven't done the math lately, but a few years ago the Fed owned about 7 or 8% of the National Debt. Money paid to the Fed in interest by the Treasury is rebated back to the Treasury after deducting the Fed's expenses.

The Fed's independent ("private") nature was intended to prevent the government from creating arbitrary amounts of money. The reality of it is that the Fed exists primarily to protect the large banks -- it's basically a banking cartel. The economy, inflation, unemployment, etc, are all secondary. Survival of the large banks is Job One.

Ash and Sharky thank you both, you have made something less murkier and more comprehensible even for my cranium. That in iyself is a huge feat! Thank you!!

[cjppjc]

Re: Fed starts printing press: $1T+ in additional purchases

Ash and Sharky thank you both, you have made something less murkier and more comprehensible even for my cranium. That in iyself is a huge feat! Thank you!!

Ditto. And to all the others who have helped me in understanding a little better what goes on in the murkey world of Central Bank finances.

[Prazak]

Re: Fed starts printing press: $1T+ in additional purchases

Forgetting the 'valence' of this week's Fed action for a moment (i.e. the inflationary camp vs the jump-start the economy camp), was anyone else struck by how anti-climactically it was all received? This was the fabled last bullet, the nuclear option, pick your metaphoric poison. And a whole lotta not much happened. It's like the Wizard of Oz pressed the red button forgetting there was a tear in the the control room curtain and we could all see his *** poking through. The Fed's power was illusory and symbolic even at its zenith. Remember Greenspeak? There was a kid in Peoria saying 'mommy that man isn't saying anything' before all the adults in the crowd told him to hush up and mind his elders. Well you know that Greenspan..he wasn't saying anything --and he's all but admitted it in recent weeks. The kid was right. Let's find him and make him President 'cause Hoover Jr. ain't gonna do it.

As soon as people notice the grease paint and sense a deperate actor, the string becomes harder to push on. They're always pushing on a string, except now you can really see them sweating. Apart from some almost-obligatory commodity moves, the markets seem to be calling the CB bluff. We are rotating out of CB's into...something else.

What blew me away is how this was hailed in many corners as a really great idea. "Gee, why hadn't the Fed just done this before? It made Mr. Market feel really nifty." No sense whatsoever at the desperation in such a move.

I wish it had happened today, on the Vernal Equinox, so we could at least impart some pagan significance to it, or to its failure. Some kind of cosmic mojo or anti-mojo.

[vanvaley1]

Re: Fed starts printing press: $1T+ in additional purchases

Have you read the book? Seriously, dude, that's a review. It's basically a history of nation-building policies since the sixties with an eye toward reforming the leadership's (or the counter-revolution's) economics bent by sending in the "Chicago Boys" and then reforming the country by means of economic distress or "shocks." There are times when he will mention the loss of social programs in the process, but social programs has nothing to do with what the book is about. There's also a bit of black magic she employs in drawing the direct line between economic shocks and state violence (in some cases, like Pinochet, it's more effective; in others, like Yeltsin, not so much IMO), but much of the book is solidly grounded in policy research. She does fall into the left-of-liberal camp, but at least they're willing to condemn Clinton alongside Kissinger.

Read the book. Makes ya ask a lot of questions. Found the repetition of her formula a bit tedious but she used data from each country to prove her points and wasn't dogmatic about how the formula was implemented. Each case she presents she sites the variation of application of 'crisis-management' to distressed economies to meet different countries custom and cultural disversity. Wonder how ours is gonna work itself out.

[bart]

Re: Fed starts printing press: $1T+ in additional purchases

Bart, I believe it would be great if you could open a thread called "H4.1 and Fed financial magic for dummies". There are so many interesting to discuss and so many people are intimidated about looking to that balance sheet. Extremely simple things can appear very complicated and intimidating.

Just a simple question such as: What is the Fed using to buy treasuries? , would deserve a few good messages. I'm not sure myself I understand exactly what is happening in Fed's Kitchen and I think many iTulipers would love to read a beginner's guide on what exactly is happening there.
If I knew more about this subject I would open myself that thread, but I wouldn't be able anyway to illustrate it with such nice charts as you make ...

So, respectfully ,.... Pleaaase!

Really interesting idea... but I wonder if there's much interest in it beyond a few Fed data & report 'sluts'? It's not a trivial task as you likely know... and some of it really & truly is very arcane and odd and complex, depending on the level of detail & explanation desired. For example, a good knowledge of accounting can be a hindrance since the rules for central bank accounting aren't the same as for a bank or corporation.

Even the title of the H.4.1 weekly report is a huge mouthful: "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks".

Part of the difficulty is summed up with:
“The process by which banks create money is so simple that the mind is repelled.”
-- John Kenneth Galbraith
and
"Only the small secrets need to be protected. The big ones are kept secret by public incredulity."
-- Marshall McCluhan


I can answer your one question though - the Fed will be buying the Treasuries with money literally created from thin air, via an entry at a Fed computer where they will simply credit the accounts of primary dealers (like GS, BoA and Citi - full list at http://www.ny.frb.org/markets/pridealers_current.html), who are actually the entities that buy from the Treasury.




Maybe you could start a thread with a question or two? I'll wing it with answers, and that will also help judge the interest level in the area. It will also lessen the gradient, and allow me to hide my ignorance a little better too... ;)

[cjppjc]

Re: Fed starts printing press: $1T+ in additional purchases

Really interesting idea... but I wonder if there's much interest in it beyond a few Fed data & report 'sluts'? It's not a trivial task as you likely know... and some of it really & truly is very arcane and odd and complex, depending on the level of detail & explanation desired. For example, a good knowledge of accounting can be a hindrance since the rules for central bank accounting aren't the same as for a bank or corporation.

Even the title of the H.4.1 weekly report is a huge mouthful: "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks".

Part of the difficulty is summed up with:
“The process by which banks create money is so simple that the mind is repelled.”
-- John Kenneth Galbraith
and
"Only the small secrets need to be protected. The big ones are kept secret by public incredulity."
-- Marshall McCluhan


I can answer your one question though - the Fed will be buying the Treasuries with money literally created from thin air, via an entry at a Fed computer where they will simply credit the accounts of primary dealers (like GS, BoA and Citi - full list at http://www.ny.frb.org/markets/pridealers_current.html), who are actually the entities that buy from the Treasury.




Maybe you could start a thread with a question or two? I'll wing it with answers, and that will also help judge the interest level in the area. It will also lessen the gradient, and allow me to hide my ignorance a little better too... ;)

Ignorance my eye.:cool:

[GRG55]

Re: Fed starts printing press: $1T+ in additional purchases

Are these coordinated moves? Is that a nieve question? What Central Bank is next?

We are only small fry, freezing in the extended winter up here [global warming, where art thou?], but certainly would not want to be left out of the party...

Bank of Canada hints at quantitative easing moves

Sat Mar 14, 2009 3:51pm EDT
HORSHAM, England, March 14 (Reuters) - The Bank of Canada hinted on Saturday it could soon start printing money to create growth after a global pledge by central banks to take extreme action as economic conditions deteriorate.

G20 central bankers, meeting with finance ministers ahead of the London summit on April 2, signed up to a statement to keep interest rates low for as long as it took to get the economy back on its feet and engage in quantitative easing if needed.

The Bank of Canada has already said it will soon outline a framework for quantitative and credit easing, giving it the means to conduct similar actions to the Bank of England and Swiss National Bank.

"It's important to do that in a comprehensive, holistic fashion so that people can see the range of tools that the bank continues to have," Carney told reporters after the meeting of old and emerging economic powers in southern England...

[GRG55]

Re: Fed starts printing press: $1T+ in additional purchases

Anyone still think we're getting out of this?

...Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.

Here's the game schedule, just in case anyone wants to pick up tickets...:rolleyes:

Tentative Outright Treasury Operation Schedule Operation Date Settlement Date Operation Type1 Maturity/Call Date Range

March 25, 2009

March 26, 2009

Outright Treasury Coupon Purchase

02/29/16 – 02/15/19

March 27, 2009

March 30, 2009

Outright Treasury Coupon Purchase

03/31/11 – 04/30/12

March 30, 2009

March 31, 2009

Outright Treasury Coupon Purchase

08/15/26 – 02/15/39

April 1, 2009

April 2, 2009

Outright Treasury Coupon Purchase

05/31/12 – 08/31/13

April 2, 2009

April 3, 2009

Outright Treasury Coupon Purchase

09/30/13 – 02/15/16

[Slimprofits]

Re: Fed starts printing press: $1T+ in additional purchases

http://www.bloomberg.com/apps/news?p...d=aogAIdJC8sRc

Final Purchase

The Fed bought $1.936 billion in debt today through eight securities maturing from December 2013 to September 2014, according to a Federal Reserve Bank of New York statement.