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Thread: Get Ready For QE4. Fed To Buy $870B More Through 2013, Barclays Says

  1. #1

    Default Get Ready For QE4. Fed To Buy $870B More Through 2013, Barclays Says

    http://www.forbes.com/sites/afonteve...ial-gdp-slows/

    It is widely expected that the Federal Reserve will announce more balance sheet expansion, or quantitative easing, on Wednesday. QE4 will consist of the Fed buying $85 billion in mortgage-backed securities and longer-term Treasuries at least to the end of next year, totaling at least $870 billion, according to Barclays.

    The latest QE-program announced by the Bernanke Fed will be tied to the progress of the labor market, which has seen the unemployment rate tick down as a consequence of a falling labor participation rate, rather than truly improved economic conditions. This could mean the potential rate of output growth in the U.S. has taken a bit hit since the financial crisis.

    A pretty strong consensus has formed among analysts and economists that the Fed will go full-steam ahead with its plans to deliver policy easing via balance sheet expansion. Specifically, after announcing open-ended purchases of mortgage-backed securities worth $40 billion a month in September, dubbed QEternity by the media, the FOMC is expected to unveil a new $45 billion plan to buy Treasuries in order to replace Operation Twist.

    This means even looser monetary policy, as the Fed won’t be sterilizing the $45 billion that used to be part of the Twist. Chairman Ben Bernanke has been very clear about the need to provide continued support until he sees a real improvement in labor markets, and is putting his money where his mouth is: the Fed will have bought $870 billion in new securities from September to the end of 2013, according to Barclays, which expects Treasury purchases to end with June, while the MBS program should last to the end of the year. By the end of 2013, the Fed will own between 34% and 39% of the Treasury market across each sector of the curve, Nomura’s analysts noted.

    How much is enough, though? The Fed has come under heavy criticism, particularly by Republicans, for its asset purchases, while the FOMC has been divided for some time, with the likes of Jeffery Lacker and Richard Fisher consistently dissenting with the committee’s decisions. Bernanke tried to shed some light on the issue, with the October FOMC statement noting:

    The outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.

    The debate has raged on both within the FOMC and the broader academic and financial community. Indeed, there’s been talk of modifying the Fed’s forward guidance to include some measure of progress in the labor market, along with factors that take into account inflation. Analysts don’t expect any major breakthroughs in the Fed’s communication strategy on Wednesday, yet it is clear that simply looking at the unemployment rate doesn’t accurately measure progress on the jobs front.

    Joblessness has ticked down 1.5 percentage points since the end of 2010, but only a portion of that is due to an improved economic environment, according to Nomura’s research team. A major factor pushing down the unemployment rate is the steady decline in the labor participation rate, which has fallen to its lowest levels since the mid-1980s. That’s clearly not a good thing.

    As the unemployment rate has declined, it has actually worried economists that are seeing signs of a permanent reduction in the potential output of the U.S. economy. Citing Okun’s Law, which stipulates that for joblessness to slide real GDP must grow above potential, Nomura’s research team indicates that real output growth has averaged just under 2% annually since the end of 2010, meaning unemployment fell quicker than it should have.

    The labor force participation rate, which peaked in 2000, has been trending lower ever since. Rising college enrollment, retiring Baby Boomers, and a topping out of the participation rate for women are all part of the explanation, but the decline has exceeded those demographic factors, Nomura’s team notes. This means these workers will probably return to the labor market as the economy improves, limiting that rate at which unemployment can fall.

    Despite declining joblessness, firms are still announcing big rounds of job cuts. Over the past few months, companies like Boeing, Citigroup, Research in Motion, and PepsiCo have announced layoffs.

    The Fed will therefore keep its QE programs alive until it can project above-trend GDP growth, Nomura’s research team argues. They see economic growth picking up in the second-half of 2013, indicating above-trend GDP projections won’t come in until then, at which point the Fed will begin to tone down its easing, first by halting Treasury purchases, and then by ending its MBS program.
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  3. #2

    Default Get Ready For QE4: Fed To Buy $870B More Through 2013, Barclays Says

    It is widely expected that the Federal Reserve will announce more balance sheet expansion, or quantitative easing, on Wednesday. QE4 will consist of the Fed buying $85 billion in mortgage-backed securities and longer-term Treasuries at least to the end of next year, totaling at least $870 billion, according to Barclays.

    The latest QE-program announced by the Bernanke Fed will be tied to the progress of the labor market, which has seen the unemployment rate tick down as a consequence of a falling labor participation rate, rather than truly improved economic conditions. This could mean the potential rate of output growth in the U.S. has taken a bit hit since the financial crisis.

    a lot more here: http://www.forbes.com/sites/afonteve...ial-gdp-slows/
    "Integrity means having to say things that people don't want to hear & especially to say things that the regime doesn't want to hear.” -Ron Paul

    "Bathtub falls and police officers kill more Americans than terrorism, yet we've been asked to sacrifice our most sacred rights for fear of falling victim to it." -Edward Snowden

  4. #3

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    I just pulled this colorful comment from Karl Denninger's thread on the very same subject.

    Correct me if I'm wrong here, but the way I understand it the economy CANT grow under ZIRP and huge government deficits.

    The combination of suppressed capital formation, increasing devaluation of the currency, and the current tax and regulatory structure in this country make starting new business ventures very risky.

    And all the connected players continue to make out like bandits while the rest of us, forced to 'compete' in the 'free market' are eating our daily **** sandwich while we watch our purchasing power diminish continuously.

    These *******s are not going to stop doing what they're doing until somebody forces them to stop. I don't mean with laws. I mean with physical force.

    Sociopaths don't care if they're hurting people. That's what they do. What they care about is their own sick worthless skins and until those are directly threatened, the amount of real change = ZERO.


    “Our illegal population alone exceeds the all the Irish, Jewish and British immigrants who came. Each year, we catch more people breaking in at the border than all the Swedes and Norwegians who came to America in 200 years. Half a million illegal aliens succeed in breaking in every year, more than all the Greeks or Poles who came legally from the Revolution to 1960..” - Patrick J. Buchanan

  5. #4

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    Nothing is original out of dipshit Derringer's mouth... that from the member consensus and from what other economists say.

    Jim Rogers stated long ago, Bernanke was going to do QE forever, that it's to save their own hides and governments spending on their empire for themselves. It screws everybody else.

    Nothing new...
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  6. #5

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    How much longer before this ends?
    Diversity finds unity in the message of freedom.

    Dilige et quod vis fac. ~ Saint Augustine

    Quote Originally Posted by HOLLYWOOD View Post
    If anything, this situation has proved the government is nothing but a dictatorship backed by deadly force... no different than the dictatorships in the banana republics, just more polished and cleverly propagandized.

  7. #6

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    Quote Originally Posted by Deborah K View Post
    How much longer before this ends?
    Mere months or a grueling decade. The problem being that the financial world is so interconnected that even the slightest disturbance could send shockwaves through this thoroughly papered over ponzi scheme. The odds say they don't have much time, then again they have managed to survive this long.
    Last edited by AuH20; 12-12-2012 at 12:57 PM.
    “Our illegal population alone exceeds the all the Irish, Jewish and British immigrants who came. Each year, we catch more people breaking in at the border than all the Swedes and Norwegians who came to America in 200 years. Half a million illegal aliens succeed in breaking in every year, more than all the Greeks or Poles who came legally from the Revolution to 1960..” - Patrick J. Buchanan

  8. #7

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    Are we really only on QE4? Could have sworn it was QE17 by now...

  9. #8

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    We're gonna have to force the end with nullification, secession, alternative currencies, creating a new free market with farmers' markets and swap meets, creating our own energy sources, starting with our homes and small businesses, and so on. Screw them. Continue to change hearts and minds through dissemination.
    Diversity finds unity in the message of freedom.

    Dilige et quod vis fac. ~ Saint Augustine

    Quote Originally Posted by HOLLYWOOD View Post
    If anything, this situation has proved the government is nothing but a dictatorship backed by deadly force... no different than the dictatorships in the banana republics, just more polished and cleverly propagandized.

  10. #9

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    Quote Originally Posted by Deborah K View Post
    We're gonna have to force the end with nullification, secession, alternative currencies, creating a new free market with farmers' markets and swap meets, creating our own energy sources, starting with our homes and small businesses, and so on. Screw them. Continue to change hearts and minds through dissemination.
    A nationwide tax revolt would be grand. We will withdraw our consent. Let them arrest 25 million people or more. We're reaching that point slowly but surely.
    Last edited by AuH20; 12-12-2012 at 01:06 PM.
    “Our illegal population alone exceeds the all the Irish, Jewish and British immigrants who came. Each year, we catch more people breaking in at the border than all the Swedes and Norwegians who came to America in 200 years. Half a million illegal aliens succeed in breaking in every year, more than all the Greeks or Poles who came legally from the Revolution to 1960..” - Patrick J. Buchanan

  11. #10

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    the markets completely shrugged off QE4

    http://www.zerohedge.com/news/2012-12-12/out-ammo

    It has been three years and nine months since the Fed announced 'real' QE1. Presented for your convenience below is the market's reactions then and for comparison we have included today's reaction. It seems the markets - whether Gold, FX, or Treasuries - have become numb (or engorged) on the Fed's actions. This leaves us with the sad conclusion, which the Fed will be last to acknowledge: the ammo, it's gone. It's all gone.



    EURUSD - rose 370 pips on the announcement of QE1, rose 45 pips on QE4...



    Gold- rose 5.4% on the announcement of QE1 but today (on QE4) Gold jumped 1.3% then faded back



    Treasuries - When QE1 was announced Treasury Prices exploded in the then 10Y by over $4, today saw the same (now 7Y) bond price drop by around 4 Ticks...

  12. #11

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    I think Bernanke is just trying to keep the ship from sinking during his watch. Once his term is up (in 2014 I believe), Obama will replace him and he can wipe the sweat off his forehead. He doesn't want to be the on in charge when the ship goes down. As Ron Paul said, these QE's are becoming less and less effective. There will come a point where even printing a zillion dollars won't help and Bernanke just hopes it doesn't happen till after 2014.

  13. #12

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    Quote Originally Posted by twomp View Post
    I think Bernanke is just trying to keep the ship from sinking during his watch. Once his term is up (in 2014 I believe), Obama will replace him and he can wipe the sweat off his forehead. He doesn't want to be the on in charge when the ship goes down. As Ron Paul said, these QE's are becoming less and less effective. There will come a point where even printing a zillion dollars won't help and Bernanke just hopes it doesn't happen till after 2014.
    Most of this electronically created money is (a) being hoarded by the large banks (b) filtered through the financial service industry. If it is ever forced into the actual economy due to some unforeseen event, it's GAME OVER instantly. So far there hasn't been a heavy velocity trend. It's been more a sustained trickle which is still playing havoc with food production prices.
    Last edited by AuH20; 12-12-2012 at 01:19 PM.
    “Our illegal population alone exceeds the all the Irish, Jewish and British immigrants who came. Each year, we catch more people breaking in at the border than all the Swedes and Norwegians who came to America in 200 years. Half a million illegal aliens succeed in breaking in every year, more than all the Greeks or Poles who came legally from the Revolution to 1960..” - Patrick J. Buchanan

  14. #13

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    Quote Originally Posted by randomname View Post
    the markets completely shrugged off QE4

    http://www.zerohedge.com/news/2012-12-12/out-ammo
    they already knew QE was here to stay.

    QE Infinity as Ron says.
    "Integrity means having to say things that people don't want to hear & especially to say things that the regime doesn't want to hear.” -Ron Paul

    "Bathtub falls and police officers kill more Americans than terrorism, yet we've been asked to sacrifice our most sacred rights for fear of falling victim to it." -Edward Snowden

  15. #14

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    Quote Originally Posted by twomp View Post
    I think Bernanke is just trying to keep the ship from sinking during his watch. Once his term is up (in 2014 I believe), Obama will replace him and he can wipe the sweat off his forehead. He doesn't want to be the on in charge when the ship goes down. As Ron Paul said, these QE's are becoming less and less effective. There will come a point where even printing a zillion dollars won't help and Bernanke just hopes it doesn't happen till after 2014.
    I hope he gets what coming to him and it all tumbles down before his term is up.

  16. #15

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    Quote Originally Posted by randomname View Post
    I hope he gets what coming to him and it all tumbles down before his term is up.
    The 'expert' on the Great Depression who stated under the oath that he would not monetize the debt. Bernanke should be waterboarded and forced to run through an active minefield, when this charade finally comes to a crashing halt. The man is literally slated to be a killer of millions, with his irresponsible actions.
    Last edited by AuH20; 12-12-2012 at 01:22 PM.
    “Our illegal population alone exceeds the all the Irish, Jewish and British immigrants who came. Each year, we catch more people breaking in at the border than all the Swedes and Norwegians who came to America in 200 years. Half a million illegal aliens succeed in breaking in every year, more than all the Greeks or Poles who came legally from the Revolution to 1960..” - Patrick J. Buchanan

  17. #16

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    Quote Originally Posted by Deborah K View Post
    How much longer before this ends?
    From the TF Metals Report site...

    -----------------
    OK, so now we know why the metals aren't rallying sharply. There are conditions for continued QE and they are similar to the Fed Funds conditions.

    However, I watched the press conference and personally listened to what The Bernank said. He clearly stated this:

    The conditions for curtailing QE and raising the Fed Funds rate are only being offered for the purpose of transparency. There is no change to the actual forecast of "extraordinarily low rates through mid-2015". No change at all. The Fed does not expect a sub 6.5% unemployment rate OR a greater than 2.5% inflation rate through mid-2015 and, therefore, low rates and $85B/month in QE can be expected to continue until then.

    YOU MUST UNDERSTAND THIS. The metals are trading this afternoon as if QE will only last through April. This is nonsense and that is NOT what The Fed is saying. The Bernank even went so far as to say that even if the unemployment rate fell to 6.5%, that would not mean a curtailment of QE. They'd still be looking at the labor force participation rate and other factors. He called this ongoing assessment "subjective".

    And, again, this is all BS anyway! Economic conditions are only a secondary reason for QE. The primary reason the Fed is compelled to print over $1T in 2013 is deficit funding!! Without The Fed and the PDs buying $1T in treasuries next year, rates would skyrocket to the place where natural, organic buyers would materialize. Given the current state of affairs, at what rate would that be? 8%? 10%? 15%? NO WAY that can be allowed so The Fed is forced to fund almost all of the U.S. federal deficit next year and beyond.

    So, the real metric as to when QE might end is this: When can The Fed exit the treasury market without causing rates to violently rise? The answer is, of course, NEVER. Can't do it. Not gonna happen.

    Unsterilized QE, at a minimum of $85,000,000,000 per month is here to stay. Permanent and to infinity. BTFD.

    TF

    http://www.tfmetalsreport.com/blog/4373/bernank-giveth
    Last edited by AmericasLastHope; 12-12-2012 at 01:35 PM.
    "A free people ought not only to be armed and disciplined, but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government." George Washington

  18. #17

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    except silver.

    Quote Originally Posted by randomname View Post
    the markets completely shrugged off QE4

    http://www.zerohedge.com/news/2012-12-12/out-ammo
    "Like an army falling, one by one by one" - Linkin Park

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    https://www.youtube.com/watch?v=q6vi528gseA

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    This means even looser monetary policy, as the Fed won’t be sterilizing the $45 billion that used to be part of the Twist
    They can't do it anymore even if they want to. They are nearly out of short term Treasuries to redeem for longer term ones so if they still want to aquire longer term Treasuries and keep those rates lower (which will help keep mortgage rates lower) they have to put out more money to purchase them with (unless they started using maturing mortgage backed securities but they have been rolling them over already in addition to the $40 billion a month in additional purchases they announced last time).

    The US Treasury will probably have to change their maturities as well. They have not been issuing much long term debt and becasuse of that, most of them were going to the Fed via Operation Twist. I have suggested that the Treasury SHOULD be issuing more long term debt to lock in current low interest rates and lower costs of the government borrowing in the future.
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    Whisky Tango Foxtrot - isn't QE3 still ongoing? They are OVERLAPPING these things now??!!??





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