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Thread: QE4 Started & Nobody Noticed

  1. #1

    QE4 Started & Nobody Noticed

    The Fed has printed $326 billion since September 11, 2019.



    This amounts to a monthly increase of $108 billion. For comparison, QE3 at its height was 'only' $85 billion per month.

    There are two components to this new QE: repo operations (essentially lending against collateral, like the ECB does) and outright asset purchases (like the Fed did during previous QE rounds). Three months ago, the repo market blew up, with interest rates spiking to extraordinary highs. What exactly caused this is still unknown, but it indicates severe stress in the financial system (i.e. someone couldn't pay their debts). The Fed responded first by offering short term repos, then longer term repos, then it restarted the asset purchase program, promising to buy $60 billion per month through at least March 2020. Of course, this is in addition to the Fed lowering the funds rate several times last year, after they realized that this economy will implode if rates return to even a small fraction of what was once considered normal.

    Had the Fed not taken these actions, we'd likely be a recession right now.

    If they don't ease further in the near future, it's likely that we'll soon be in a recession.

    What's really worrying, however, is not so much a recession, as the prospect of the Fed easing in perpetuity to prevent one.

    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken



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  3. #2
    On the other hand, compared to one year ago, Fed holdings have decreased by $20 billion. https://www.federalreserve.gov/monet...centtrends.htm

  4. #3
    Quote Originally Posted by Zippyjuan View Post
    On the other hand, compared to one year ago, Fed holdings have decreased by $20 billion. https://www.federalreserve.gov/monet...centtrends.htm
    Right, because they stopped tightening and started loosening...

    I'm not sure what your point is.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  5. #4
    The event which caused the Fed to lose their minds and suddenly restart QE was the breaking of the normal short term debt markets.

    It started in repo markets, with something called asset backed commercial paper:



    ^^^not normal

    The ABS market is about lending to lower quality borrowers against collateral.

    Someone needed money, and the guys with the money said "no thanks," even at 5x the normal rate.

    Why? Because the collateral being offered was highly questionable, to the point that lenders wouldn't take it at any price.

    This is EXACTLY the same thing that happened in 2007.

    Back then, the assets backing the asset backed commercial paper market were, ultimately, subprime mortgages.

    This time, we don't know what it is, but my guess is that it's very $#@!ty corporate junk bonds.

    ...which would include "investment grade" trash that the ratings agencies refuse to downgrade.

    After failing in the normal repo markets, whichever $#@!banks were involved desperately sought cash wherever they could get it:



    This shows the federal funds rate (the rate at which US banks lend to one another) exceeding the Fed's target.

    This should pretty much never happen, because the Fed has a giant printing press and is committed to suppressing rates.

    Yet, interbank lending rates broke the Fed's target as repo rates were exploding into the stratosphere.

    This represents desperate debtors seeking cash to pay their liabilities.

    They couldn't get the money in repo, so they tried to get it in federal funds.

    And then, when they couldn't get what they needed in federal funds, they went overseas:



    This is LIBOR, which reflects the cost of borrowing dollars outside the US.

    As you can see, it shows the same rate spike as all the other charts.

    This was a massive event.

    And that's why the Fed went full retard three months ago.

    This was not an isolated event; this reflects a massive overhang of bad debt which can only be serviced with the help of the Fed.
    Last edited by r3volution 3.0; 12-13-2019 at 11:11 PM.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  6. #5
    Hey now! Don't you know there's an IMPEACHMENT (read "dog and pony show") going on and that the fate of the entire civilized world likely hangs in the balance? Trivial stuff like QE4 can wait until after we save the world from that.
    Chris

    "Government ... does not exist of necessity, but rather by virtue of a tragic, almost comical combination of klutzy, opportunistic terrorism against sitting ducks whom it pretends to shelter, plus our childish phobia of responsibility, praying to be exempted from the hard reality of life on life's terms." Wolf DeVoon

    "...Make America Great Again. I'm interested in making American FREE again. Then the greatness will come automatically."Ron Paul

  7. #6
    Quote Originally Posted by CCTelander View Post
    Hey now! Don't you know there's an IMPEACHMENT (read "dog and pony show") going on and that the fate of the entire civilized world likely hangs in the balance? Trivial stuff like QE4 can wait until after we save the world from that.
    Market actors are determining the fate of the world (within the constraints imposed by jackass politicians).

    Meanwhile, those jackass politicians, who ultimately caused 100% of the problem, fight over who will get the blame.

    So, same ol same ol...

    P.S. Really, they should be be fighting over getting out of dodge; whichever party's in power when this blows is done.
    Last edited by r3volution 3.0; 12-13-2019 at 11:57 PM.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  8. #7
    As to where this is all heading:

    Liquidation, i.e. the reallocation of presently misallocated resources, is the only solution, but this is politically impossible, as the Fed's only true mandate is to reelect politicians, and politicians who preside over depressions don't get reelected. So, as always, the Fed is trying to provide a "soft landing," i.e. print enough to allow a tad of liquidation (i.e. future growth), but without serious unemployment (= lost elections). But they always fail, because what they're trying to do (control, in a rational way, the most important price in an immensely complex market economy) is impossible. All the Fed can do is print so much that the current debt problem is delayed., or print somewhat less, and then react to the recession by printing that larger amount anyway. Anyway, recession or not, Fed reacting quickly enough or not to present stresses, the long-term situation is that the Fed is going to have to either allow total liquidation (politically impossible - see above), or go absolutely ape$#@! with money printing, to the point that last episode's QE will be not noticeable on a chart. And have no doubt; the Fed can and, if politically necessary, will, monetize every $#@!ing dollar denominated liability on planet Earth. Hyperinflation is preferable, politically, to liquidation.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  9. #8
    only liberals who hate America want to complain about so called "QE", our economy is booming and there's nothing you can do about it.

    DOW is up, 401Ks are up, people are getting tax cuts, job numbers are up, and all liberals can do is whine whine whine and cry like babies because they can't stand that a reality tv show host beat a woman who wanted to be President since she was a kid. Shame.



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  11. #9
    Quote Originally Posted by r3volution 3.0 View Post
    As to where this is all heading:

    Liquidation, i.e. the reallocation of presently misallocated resources, is the only solution, but this is politically impossible, as the Fed's only true mandate is to reelect politicians, and politicians who preside over depressions don't get reelected. So, as always, the Fed is trying to provide a "soft landing," i.e. print enough to allow a tad of liquidation (i.e. future growth), but without serious unemployment (= lost elections). But they always fail, because what they're trying to do (control, in a rational way, the most important price in an immensely complex market economy) is impossible. All the Fed can do is print so much that the current debt problem is delayed., or print somewhat less, and then react to the recession by printing that larger amount anyway. Anyway, recession or not, Fed reacting quickly enough or not to present stresses, the long-term situation is that the Fed is going to have to either allow total liquidation (politically impossible - see above), or go absolutely ape$#@! with money printing, to the point that last episode's QE will be not noticeable on a chart. And have no doubt; the Fed can and, if politically necessary, will, monetize every $#@!ing dollar denominated liability on planet Earth. Hyperinflation is preferable, politically, to liquidation.
    ahhhh, your wet dream of an economic collapse.

  12. #10
    Quote Originally Posted by PRB View Post
    only liberals who hate America want to complain about so called "QE", our economy is booming and there's nothing you can do about it.

    DOW is up, 401Ks are up, people are getting tax cuts, job numbers are up, and all liberals can do is whine whine whine and cry like babies because they can't stand that a reality tv show host beat a woman who wanted to be President since she was a kid. Shame.
    I agree liberals are whiners .

  13. #11
    Good time to buy PM's right now, they should be up 20% in the next few years if the last QE event is anything to go by

  14. #12
    [QUOTE=Warlord;6896501]Good time to buy PM's right now, they should be up 20% in the next few years if the last QE event is anything to go by[/QUOT The outlook for PMs looks optimistic to me .

  15. #13
    [QUOTE=oyarde;6896529]
    Quote Originally Posted by Warlord View Post
    Good time to buy PM's right now, they should be up 20% in the next few years if the last QE event is anything to go by[/QUOT The outlook for PMs looks optimistic to me .
    Buy on the dips. Isn't that what they say Oyarde?

  16. #14
    You must spread some Reputation around before giving it to r3volution 3.0 again.

    https://www.ccn.com/the-fed-just-ble...ancial-crisis/


    The Federal Reserve’s intervention in the financial system reached truly epic proportions Thursday after the central bank’s New York division announced the largest series of repo operations ever.

    The announcement came mere days after the Federal Open Market Committee (FOMC) painted a rosy picture of the U.S. economy in its final policy meeting of 2019. But what the Fed says and what it does are two completely different things.
    Central bankers are admitting – by their actions, not words – that crisis is brewing in the financial sector.

    The New York Fed announced Thursday it’s planning to inject almost half a trillion dollars into the overnight repo market through the new year, significantly increasing intervention to ensure short-term interest rates are kept in check. The plan includes providing an additional $425 billion in short-term funding to banks in dire need of cash.

    As the Financial Times reports, the nuts and bolts of the operations include $120 billion in overnight repo up to Dec. 30 and in early January, alongside $175 billion in longer-term operations.

    But if the repo market is truly broken, as evidenced by the banking sector’s dependence on daily liquidity injections, there’s a good chance it’ll spill over to the rest of the economy.

    Where in the economy will it spill over to first? That's what I'd like to know.
    Last edited by Pauls' Revere; 12-14-2019 at 06:20 PM.
    When life itself seems lunatic, who knows where madness lies? - Miguel de Cervantes, (Don Quixote)

    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks
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    You "guys" have the market cornered on transexual satan worshipping anarchists

    "Our Enemy, The State" by Albert Nock. https://famguardian.org/Publications...bertJKnock.pdf

  17. #15
    Quote Originally Posted by PRB View Post
    only liberals who hate America want to complain about so called "QE", our economy is booming and there's nothing you can do about it.
    lulz

    Quote Originally Posted by Pauls' Revere View Post
    The Federal Reserve’s intervention in the financial system reached truly epic proportions Thursday after the central bank’s New York division announced the largest series of repo operations ever.
    That's because we have the greatest, healthiest, biggerest economy ever, of course.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  18. #16
    If the economy is really booming, is stimulus necessary?



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  20. #17
    Quote Originally Posted by Zippyjuan View Post
    If the economy is really booming, is stimulus necessary?
    You got it backwards

    1. the economy is booming BECAUSE stimulus
    2. we want to keep it booming, that's why we invest more, there's no such thing as "enough"
    3. Warren Buffett 101 : when the stock goes up, BUY MORE.

  21. #18
    Quote Originally Posted by PRB View Post
    You got it backwards

    1. the economy is booming BECAUSE stimulus
    2. we want to keep it booming, that's why we invest more, there's no such thing as "enough"
    3. Warren Buffett 101 : when the stock goes up, BUY MORE.
    Trump wants negative interest rates and heuge QE so he can look amazing just in time for the election.

  22. #19
    Quote Originally Posted by Zippyjuan View Post
    Trump wants negative interest rates and heuge QE so he can look amazing just in time for the election.
    why do you hate America?

  23. #20
    The Federal Reserve Bank of New York added $86.4 billion in liquidity to financial markets.

    In two operations carried out Monday, the Fed injected $36.4 billion in overnight liquidity and $50 billion in 32-day liquidity extending into the coming New Year. Eligible banks took far less than the $120 billion the Fed was willing to offer in the overnight repurchase agreements, or repo, operation, while they wanted just slightly more long-term liquidity than the Fed was offering in the longer-term repo operation.

    As of the most recent data from last week, the Fed reported that its balance sheet had risen to $4.1 trillion from $3.8 trillion in September. About $213 billion in repo interventions were also outstanding then. That amount of repo operations could rise to nearly half a trillion dollars if the eligible banks tap all the liquidity the central bank has said it would offer over coming days.
    https://www.wsj.com/articles/new-yor...es-11576509343
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  24. #21
    Nobody noticed? A lot of people have noticed. It's been in the news since the repo rates blew out in September. I've posted a lot about it over here:

    https://www.pmbug.com/forum/f4/ameri...html#post34232
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  25. #22
    Fwiw, I maintain that the repo operations are doing multiple things: 1) soaking up growing government debt issuance (QE) as the dollar global standard system is dismantled 2) soaking up the associated dumping of Treasuries by foreign holders that no longer need to hold them as part of that system and the spike in rates that would accompany open market dumping (we saw that briefly end of 2018 and how stocks responded) 3) slipping fresh liquidity to troubled banks like DB. So point is that it's a lot more than just QE4. It's the quiet mechanism they're using to keep rates from spiking as the dollar standard is being unwound.

    The metric to see is how many of the borrowers actually pay the overnight/term loans back and how many don't, thus sticking the Fed with the Treasuries.

    eta: A very under-reported aspect to the repo stuff is that at the same time the repo market broke down, JPM's balance sheet reported a huge shift out of cash and into bond holdings. No details about where those bonds came from but JPM's free cash to loan out disappeared and was replaced by bond holdings. Now the Fed is taking in bonds and giving out cash...

    eta2: CNBC asked Greenspan this morning about repo. Greenspan's answer had absolutely nothing whatsoever to do with repos. Some ramble about P/E ratios, instead. Obviously they don't want to talk at all about what's really going on.
    Last edited by devil21; 12-17-2019 at 04:48 PM.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    But now you can't talk to people because of "social distancing"....brought to you by shills and politicians.

  26. #23
    Quote Originally Posted by devil21 View Post
    Fwiw, I maintain that the repo operations are doing multiple things: 1) soaking up growing government debt issuance (QE) as the dollar global standard system is dismantled 2) soaking up the associated dumping of Treasuries by foreign holders that no longer need to hold them as part of that system and the spike in rates that would accompany open market dumping (we saw that briefly end of 2018 and how stocks responded) 3) slipping fresh liquidity to troubled banks like DB. So point is that it's a lot more than just QE4. It's the quiet mechanism they're using to keep rates from spiking as the dollar standard is being unwound.

    The metric to see is how many of the borrowers actually pay the overnight/term loans back and how many don't, thus sticking the Fed with the Treasuries.

    eta: A very under-reported aspect to the repo stuff is that at the same time the repo market broke down, JPM's balance sheet reported a huge shift out of cash and into bond holdings. No details about where those bonds came from but JPM's free cash to loan out disappeared and was replaced by bond holdings. Now the Fed is taking in bonds and giving out cash...

    eta2: CNBC asked Greenspan this morning about repo. Greenspan's answer had absolutely nothing whatsoever to do with repos. Some ramble about P/E ratios, instead. Obviously they don't want to talk at all about what's really going on.
    Which countries are dumping Treasuries?

  27. #24
    Quote Originally Posted by Zippyjuan View Post
    Which countries are dumping Treasuries?
    Since when are all "foreign holders" countries?
    Quote Originally Posted by dannno View Post
    Lol, wow, Anthony Weiner, too?



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  29. #25
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  30. #26
    Quote Originally Posted by acptulsa View Post
    Since when are all "foreign holders" countries?
    A fine question for sure, and I've answered Zippy's exact question to him several times already so he's just being obtuse at this point.

    It doesn't take a rocket scientist to draw reasonable conclusions about what's going on when JPM (arguably the controller of the NY Fed, John Williams is a cut-out PR guy, nothing more) suddenly shifts from a large free cash position to a large bond position and then immediately the NY Fed starts doling out fresh cash while taking in bonds. And CLEARLY lying about it the entire time. A ton of bonds got dumped into JPM by someone and now JPM is offloading them onto the Fed, above and beyond their routine PD take-down at Treasury auctions.


    A txt file from the government. Must be true. As trustworthy as Ft Knox gold audits I'm sure.
    Last edited by devil21; 12-18-2019 at 02:55 PM.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    But now you can't talk to people because of "social distancing"....brought to you by shills and politicians.

  31. #27
    Quote Originally Posted by Pauls' Revere View Post
    You must spread some Reputation around before giving it to r3volution 3.0 again.

    https://www.ccn.com/the-fed-just-ble...ancial-crisis/


    The Federal Reserve’s intervention in the financial system reached truly epic proportions Thursday after the central bank’s New York division announced the largest series of repo operations ever.

    The announcement came mere days after the Federal Open Market Committee (FOMC) painted a rosy picture of the U.S. economy in its final policy meeting of 2019. But what the Fed says and what it does are two completely different things.
    Central bankers are admitting – by their actions, not words – that crisis is brewing in the financial sector.

    The New York Fed announced Thursday it’s planning to inject almost half a trillion dollars into the overnight repo market through the new year, significantly increasing intervention to ensure short-term interest rates are kept in check. The plan includes providing an additional $425 billion in short-term funding to banks in dire need of cash.

    As the Financial Times reports, the nuts and bolts of the operations include $120 billion in overnight repo up to Dec. 30 and in early January, alongside $175 billion in longer-term operations.

    But if the repo market is truly broken, as evidenced by the banking sector’s dependence on daily liquidity injections, there’s a good chance it’ll spill over to the rest of the economy.

    Where in the economy will it spill over to first? That's what I'd like to know.
    The greatest fear is that it will overflow into money markets funds, which would have to “break the buck”. And keep in mind that money market funds are not covered by FDIC or guaranteed in any way.

    IIRC, there was one money market fund that broke the buck during the last financial crisis, and that is when they went into full do anything mode. Explaining to people that their “cash” has disappeared is a tough thing to do. Too reminiscent of the Great Depression.
    "Foreign aid is taking money from the poor people of a rich country, and giving it to the rich people of a poor country." - Ron Paul
    "Beware the Military-Industrial-Financial-Corporate-Internet-Media-Government Complex." - B4L update of General Dwight D. Eisenhower
    "Debt is the drug, Wall St. Banksters are the dealers, and politicians are the addicts." - B4L
    "Totally free immigration? I've never taken that position. I believe in national sovereignty." - Ron Paul
    They are what they hate. - B4L


    The views and opinions expressed here are solely my own, and do not represent this forum or any other entities or persons.

  32. #28
    Quote Originally Posted by PRB View Post
    You got it backwards

    1. the economy is booming BECAUSE stimulus
    2. we want to keep it booming, that's why we invest more, there's no such thing as "enough"
    3. Warren Buffett 101 : when the stock goes up, BUY MORE.
    Monetary inflation leads to asset price inflation. Keep that pyramid growing!
    "Foreign aid is taking money from the poor people of a rich country, and giving it to the rich people of a poor country." - Ron Paul
    "Beware the Military-Industrial-Financial-Corporate-Internet-Media-Government Complex." - B4L update of General Dwight D. Eisenhower
    "Debt is the drug, Wall St. Banksters are the dealers, and politicians are the addicts." - B4L
    "Totally free immigration? I've never taken that position. I believe in national sovereignty." - Ron Paul
    They are what they hate. - B4L


    The views and opinions expressed here are solely my own, and do not represent this forum or any other entities or persons.

  33. #29
    Quote Originally Posted by devil21 View Post
    A fine question for sure, and I've answered Zippy's exact question to him several times already so he's just being obtuse at this point.
    Zippy's turning SPAM into an acronym: Shown Previously As Misinformation.
    Quote Originally Posted by dannno View Post
    Lol, wow, Anthony Weiner, too?

  34. #30
    Nope, nobody dumping Treasuries. Foreign holdings are actually up half a $trillion from a year ago. Over the last six months China has reduced theirs by one percent- hardly "dumping". But it is all "secret". Only Devil21 has the inside scoop.

    Quote Originally Posted by acptulsa View Post
    Since when are all "foreign holders" countries?
    True "foreign holders" includes all investors in those countries- not just their central banks.
    Last edited by Zippyjuan; 12-18-2019 at 05:36 PM.

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