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Thread: QE4 Started & Nobody Noticed

  1. #61
    Quote Originally Posted by Zippyjuan View Post
    Collateral is not on the Fed books because the Fed does not own the collateral. They don't own those Treasuries. The bank taking out the loan owns those Treasuries. Just as they did before they took out the loan- the ownership did not change.
    So we have treasuries the Fed is holding, but which are not included in the figures you posted. And you cannot prove they don't have more now than they did a year ago, because if the Fed told you how much collateral they're holding they'd feel the need to shoot you.

    Is all this review leading up to a point?
    'I prefer someone who burns the flag and then wraps themselves up in the Constitution over someone who burns the Constitution and then wraps themselves up in the flag.'--Molly Ivins

    'Well, you can get no more liberty than you give.'--Will Rogers



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  3. #62
    Quote Originally Posted by devil21 View Post
    That assumes they're actually buying them, as opposed to acting as an intermediary for other entities seeking to offload them away from the open market. Chinese, for example, could approach JPM for a "loan" and hand over Treasuries as collateral. Essentially JPM doing a repo for Chinese. But if the Chinese entity doesn't repay, JPM is stuck with the collateral and it goes onto JPMs books. Force repo market to lock up by ceasing to fund overnight loans, Fed printer steps in, JPM unloads Treasuries onto Fed. Fed ends up as bagholder entity and the Treasuries never hit the open market and never affected rates.
    That's a very plausible explanation.

    I tend to think that, ultimately, this is all a matter of disturbingly high treasury issuance (and/or lack of real demand therefor).

    The latest data on the PDs that I've seen still show them bursting at the seams.

    (whoops, guess spending, not taxing, is the real cost after all...)

    I'd read about that theory if you have a link to share.
    IIRC, the non-excess excess reserve theory is from Luke Gromen:



    Both of those fellows have highly interesting opinions.
    Last edited by r3volution 3.0; 12-23-2019 at 03:52 AM.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  4. #63
    Quote Originally Posted by Madison320 View Post
    This is just a wild guess but I think one potential bubble popping moment might be when the Fed's balance sheet hits a new high. What's that, another 2 or 3 months maybe when it hits 4.4T or whatever the old high is?
    At the current rate, yea, couple months.

    When the next recession arrives, they're going to go berserk and blow up the Y axis.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  5. #64
    Quote Originally Posted by Madison320 View Post
    I agree, it has to end with high inflation. That's the only thing that will stop the government from taking the path of least resistance, which is borrowing and printing.

    And before someone replies, "But Japan!" remember that there are 1000 Zimbabwes, Argentinas and Venezuelas for every Japan. Besides that I don't want to work 80 hours a week and live in a closet just to keep the government from wrecking the currency.
    Misallocators gonna misallocate...

    What happens when, one day fairly soon, Japan goes into recession, the BOJ prints half a trillion dollars, and GDP goes more negative?



    In other words, resource misallocations can only go so far until you get secular negative economic growth, which is rather the end of the game. The terrified citizens of Tokyo have delayed the reckoning through their wonderfully low-time preference behavior, but their government has wasted every cent of those massive savings in nonsensical ditch-digging.

    And this is exactly where we're heading unless the politicians...

    Nevermind, this is where we're heading.

    Godzilla cometh (and Keynes, in this long-term, is dead, so what does he care)
    Last edited by r3volution 3.0; 12-23-2019 at 04:34 AM.
    "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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  7. #65
    Quote Originally Posted by Madison320 View Post
    This is just a wild guess but I think one potential bubble popping moment might be when the Fed's balance sheet hits a new high. What's that, another 2 or 3 months maybe when it hits 4.4T or whatever the old high is?
    So when things go back to where they were for most of the last five years that will suddenly cause a collapse? https://fred.stlouisfed.org/series/WALCL
    Last edited by Zippyjuan; 12-23-2019 at 04:51 PM.

  8. #66
    It looks like the year-end repocalypse that was predicted by Credit Suisse strategist Zoltan Pozsar is not going to happen this year after all.

    Today's Term Repo which matures on January 7 saw $28.8BN in security submissions ($13.85BN in TSYs, $14.95BN in MBS), below the $35BN in total availability.

    As such, this was the second term repo since the start of the Fed's emergency repo program that covered the year-end "turn" with a maturity of Jan 2, and was not fully overalotted. ...
    ...
    In his latest comment on the repo market, Curvature's Scott Skyrm noted that "once the term RP operations switch to being undersubscribed, it either means most of the Street's year-end funding need is fulfilled, or banks are close to their balance sheet limits." ...
    ...
    Meanwhile, despite the lack of oversubscribed repo for two operations in a row, repo doomsayer Pozsar refuses to throw in the towel and in an interview posted by Bloomberg on Friday, the Credit Suisse analyst said "it's not over" yet, saying that "if the yearend is less of a problem because of the repo bazooka we got from the Fed, and if the message of my report played a part in getting that bazooka, then that’s a nice way to be proven wrong." However, he then added ominously that "now we’re getting into a point in the year when balance-sheet problems are going to flare up, and I think the system will get gummed up again."
    ...
    https://www.zerohedge.com/markets/re...-down-doomsday
    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?

  9. #67
    I went ahead and played some Goszilla live today anyway .

  10. #68
    Quote Originally Posted by Zippyjuan View Post
    Different times- different economies. Limited stimulus can help turn things around in a recession (though I did say that QE after the first round was not necessary- stimulus has diminishing returns). You don't juice a steady economy like we have now.
    Asking you for the second time. I feel a negative rep coming:

    Right, so you agree that after around 2011 you can substitute "Obama" for "Trump" and the statement would be just as true:

    Your statement:

    "Trump wants negative interest rates and heuge QE so he can look amazing just in time for the election."

    So do you agree this is true after 2011?

    "Obama wants negative interest rates and heuge QE so he can look amazing just in time for the election."

  11. #69
    Quote Originally Posted by Zippyjuan View Post
    So when things go back to where they were for most of the last five years that will suddenly cause a collapse? https://fred.stlouisfed.org/series/WALCL
    It's a psychological barrier. Remember that the when the Fed launched QE they promised it was only temporary and they'd reduce it back down after the emergency. The fact that it's going to hit a new high might pop the bubble.

    And it's not going to creep back up to the 4.5 T mark and sit there. It's going to blow thru it like a hot knife thru butter. Next stop 5 T.

  12. #70
    Quote Originally Posted by r3volution 3.0 View Post
    Misallocators gonna misallocate...

    What happens when, one day fairly soon, Japan goes into recession, the BOJ prints half a trillion dollars, and GDP goes more negative?



    In other words, resource misallocations can only go so far until you get secular negative economic growth, which is rather the end of the game. The terrified citizens of Tokyo have delayed the reckoning through their wonderfully low-time preference behavior, but their government has wasted every cent of those massive savings in nonsensical ditch-digging.

    And this is exactly where we're heading unless the politicians...

    Nevermind, this is where we're heading.

    Godzilla cometh (and Keynes, in this long-term, is dead, so what does he care)
    I would argue that price inflation is the end of the game. If you think about it, you could print your way out of ANY economic problem if you could always print faster than the printing shows up in prices.

  13. #71
    Quote Originally Posted by r3volution 3.0 View Post
    That's a very plausible explanation.

    I tend to think that, ultimately, this is all a matter of disturbingly high treasury issuance (and/or lack of real demand therefor).

    The latest data on the PDs that I've seen still show them bursting at the seams.

    (whoops, guess spending, not taxing, is the real cost after all...)



    IIRC, the non-excess excess reserve theory is from Luke Gromen:



    Both of those fellows have highly interesting opinions.
    It's also worth noting that actual cash withdrawn from a bank (say, as part of any Chinese "loan" scenario I posited) counts against the bank's reserves and draws down the bank's official reserves. Cash is treated differently, accounting-wise, than the fractional reserve deposit-based digital movement of funds. Moving digital funds between bank accounts (checks, ACH, eg) doesn't affect a bank's official reserves but withdrawing vault cash does. Whenever cash is withdrawn from a bank it comes directly out of that bank's official reserves. A good way to poke a bank in the eye is to keep withdrawing and using cash

    There's some news floating around the net recently about large amounts of physical cash and gold disappearing lately. If cash is vanishing, it is presumably affecting bank's official reserves if any of that cash was recently taken from banks.
    Last edited by devil21; 12-26-2019 at 11:19 AM.
    "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.

  14. #72
    Quote Originally Posted by Paul799 View Post
    Thanks to r3revolution, devil21 & all for this thread,
    which allowed me finally to reach a better understanding of what repo operations are.


    So, the Fed is monetising US federal debt through POMO and repo operations







    http://danielamerman.com/va/ccc/F1DefFund1219.html


    Even if Zippy for once had been right, only through POMO the Fed has been monetising 60-70% the new US federal debt in the last 3 months




    I think everybody is wondering how long before the system breaks down.
    Japan shows that it can long at least several years
    Glad it's helped. If you want to get really crazy and wonky, read this publication by the Chicago Fed describing the nuts and bolts of the system.
    https://pdfhost.io/v/ir1b43XD_MODERN..._MECHANICS.pdf


    Quote Originally Posted by acptulsa View Post
    In this way the banks are first repaid, and only then the public's money becomes officially and legally worthless.
    Ashes to ashes, dust to dust? From whence it came? Etc. Whatever religious cliche you want to use. It is the Vatican's Cestui Que Trust system, after all.
    Last edited by devil21; 12-31-2019 at 03:16 AM.
    "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.



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  16. #73
    Gold is 1515.00 so I'm good .

  17. #74
    Quote Originally Posted by Zippyjuan View Post
    Different times- different economies. Limited stimulus can help turn things around in a recession (though I did say that QE after the first round was not necessary- stimulus has diminishing returns). You don't juice a steady economy like we have now.
    Why are you ignoring my simple question? Will you get in trouble if you answer it?

    Asking for the third time:

    Your statement:

    "Trump wants negative interest rates and heuge QE so he can look amazing just in time for the election."

    So do you agree this is true after 2011?

    "Obama wants negative interest rates and heuge QE so he can look amazing just in time for the election."

  18. #75
    Quote Originally Posted by Madison320 View Post
    Why are you ignoring my simple question? Will you get in trouble if you answer it?

    Asking for the third time:

    Your statement:

    "Trump wants negative interest rates and heuge QE so he can look amazing just in time for the election."

    So do you agree this is true after 2011?

    "Obama wants negative interest rates and heuge QE so he can look amazing just in time for the election."
    Every president would like a good economy. `By 2011, the US had recovered a lot. Sure, he would not mind more help but he did not publicly demand that the Fed reduce interest rates to zero and do more quantitative easing like Trump did. He trusted the Fed to do what they thought best.

  19. #76
    Quote Originally Posted by Zippyjuan View Post
    Every president would like a good economy. `By 2011, the US had recovered a lot. Sure, he would not mind more help but he did not publicly demand that the Fed reduce interest rates to zero and do more quantitative easing like Trump did. He trusted the Fed to do what they thought best.
    QE started under Obama.

  20. #77
    Quote Originally Posted by Warlord View Post
    QE started under Obama.
    Because that is when the recession was. We don't need QE when there isn't one.

  21. #78
    Quote Originally Posted by Zippyjuan View Post
    Every president would like a good economy. `By 2011, the US had recovered a lot. Sure, he would not mind more help but he did not publicly demand that the Fed reduce interest rates to zero and do more quantitative easing like Trump did. He trusted the Fed to do what they thought best.
    You are blinded by your loyalty to the democratic party.

    The only difference between Obama and Trump is that Obama OWNED the Federal Reserve. They kept rates at zero for his entire 8 year reign and printed 3.5 trillion!!! Compare that to Trump, as soon as Trump got elected they started raising rates and reducing QE.

  22. #79
    Quote Originally Posted by Zippyjuan View Post
    Because that is when the recession was. We don't need QE when there isn't one.
    The recession ended by 2011. Obama didn't need QE2, QE3 and ZIRP for his last 5 or 6 years. Obama had the Fed under his thumb. Trump can only dream of having the kind of influence that Obama had.

  23. #80
    Quote Originally Posted by Madison320 View Post
    You are blinded by your loyalty to the democratic party.

    The only difference between Obama and Trump is that Obama OWNED the Federal Reserve. They kept rates at zero for his entire 8 year reign and printed 3.5 trillion!!! Compare that to Trump, as soon as Trump got elected they started raising rates and reducing QE.
    Which rates were zero (they were very low but not quite zero)? I would agree that QE after the first round was not necessary (there is diminishing returns- you need to exponentially increase it to continue the same effect). I also thought they could have started raising rates sooner. Do you think they should have stayed low and QE continued?
    Last edited by Zippyjuan; 12-31-2019 at 07:05 PM.



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  25. #81
    Quote Originally Posted by Zippyjuan View Post
    Because that is when the recession was. We don't need QE when there isn't one.
    why do you hate America?

  26. #82
    Quote Originally Posted by Zippyjuan View Post
    Which rates were zero (they were very low but not quite zero)? I would agree that QE after the first round was not necessary (there is diminishing returns- you need to exponentially increase it to continue the same effect). I also thought they could have started raising rates sooner. Do you think they should have stayed low and QE continued?
    They should never have done QE at all and they should've let rates find their free market level. Which would have been much higher than 0%. And they never should've borrowed trillions of dollars every year. As with most members here I don't think the government should print, borrow and ZIRP to boost the economy in the short run (at the expense of a much bigger crash in the future).

    Since your only argument that Obama didn't influence the Fed is that rates were not 0% but a tiny hair above 0%, I rest my case.

  27. #83
    Quote Originally Posted by Madison320 View Post
    I would argue that price inflation is the end of the game. If you think about it, you could print your way out of ANY economic problem if you could always print faster than the printing shows up in prices.
    I think we're saying the same thing in different ways.

    The fundamental economic problem is that the state's policies are diverting increasingly large quantities of resources toward relatively unproductive (if not actually consumptive) enterprises (e.g. "zombie companies"). Since the state finances these redistributions through inflation (because of political limits to conventional taxation), the end result will be inflationary. Barring a radical political change that would curb the growth of the state's economic interventions, we're going to experience declining economic growth and rising inflation. We should expect a repeat of the 1970s, except this time there will be no Volcker on a white horse. The misallocations are much worse now than they were c. 1980, and the liquidation required to correct them would be so painful that a Volcker-esque policy is politically impossible. I don't see any plausible argument for any outcome other than massive devaluation. That doesn't mean that there can't be a traditional, deflationary recession at some point (or several points) over the course of this future, because the Fed isn't always able to predict exactly when and how much it needs to print to prevent one, but they aren't going to allow the kind of cleansing liquidation that's necessary to fix the system. If they launched nearly half a trillion not-QE QE during relatively good times, imagine what they're going to do if/when GDP actually goes negative one quarter. Draghi's "whatever it takes" wasn't hyperbole.

    P.S. If you look at a chart of the federal funds rate, note how there have been lower highs and lower lows each cycle since c. 1980. In a way, that tells the whole story. There's lot of talk by central bankers and mainstream economists about the zero bound and unconventional monetary policy, even leaking into the popular press, but the silence as to why we're at this point, or what it really means, is deafening. They treat it like some kind of technical difficulty solvable by tweaking the XYZ lending facility, when actually it represents the terminal crisis of this monetary system.
    Last edited by r3volution 3.0; 01-06-2020 at 07:20 PM.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  28. #84
    Quote Originally Posted by r3volution 3.0 View Post
    I think we're saying the same thing in different ways.

    The fundamental economic problem is that the state's policies are diverting increasingly large quantities of resources toward relatively unproductive (if not actually consumptive) enterprises (e.g. "zombie companies"). Since the state finances these redistributions through inflation (because of political limits to conventional taxation), the end result will be inflationary. Barring a radical political change that would curb the growth of the state's economic interventions, we're going to experience declining economic growth and rising inflation. We should expect a repeat of the 1970s, except this time there will be no Volcker on a white horse. The misallocations are much worse now than they were c. 1980, and the liquidation required to correct them would be so painful that a Volcker-esque policy is politically impossible. I don't see any plausible argument for any outcome other than massive devaluation. That doesn't mean that there can't be a traditional, deflationary recession at some point (or several points) over the course of this future, because the Fed isn't always able to predict exactly when and how much it needs to print to prevent one, but they aren't going to allow the kind of cleansing liquidation that's necessary to fix the system. If they launched nearly half a trillion not-QE QE during relatively good times, imagine what they're going to do if/when GDP actually goes negative one quarter. Draghi's "whatever it takes" wasn't hyperbole.

    P.S. If you look at a chart of the federal funds rate, note how there have been lower highs and lower lows each cycle since c. 1980. In a way, that tells the whole story. There's lot of talk by central bankers and mainstream economists about the zero bound and unconventional monetary policy, even leaking into the popular press, but the silence as to why we're at this point, or what it really means, is deafening. They treat it like some kind of technical difficulty solvable by tweaking the XYZ lending facility, when actually it represents the terminal crisis of this monetary system.
    Also important to note that the rate of inflation has also significantly declined since the 1980s. Lower inflation means lower interest rates.


  29. #85
    All I can say is that prices are going up. To me that means the currency is being devalued. I am not sure if it because of inflation or deflation but, both seem like they are the same to me.

  30. #86
    Quote Originally Posted by Zippyjuan View Post
    Also important to note that the rate of inflation has also significantly declined since the 1980s. Lower inflation means lower interest rates.

    Really? You're going to post the made up inflation rate which doesn't take into account quality? Or correctly measure the cost of health care coverage?
    Something gets priced too high, take it out of the measure. And don't account for technology. That's like saying the Redskins are the same quality product as the Patriots. You're weak on that topic too.

  31. #87
    USMCA Trump quote from ZH article:

    He added that the deal is “good for China, and our long term relationship,” before adding that “250 Billion Dollars” will be returning to the US thanks to Beijing’s promise to scale up imports.
    -----------

    In other words, China sending dollars back. They don't need them anymore. Trade in Treasuries, receive dollars, send dollars back for real goods. The future is Americans working for the East, instead of the recent history of the other way around. I for one welcome our new Chinese overlords and hope to be of great service. Xiexie.
    "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.

  32. #88
    Quote Originally Posted by devil21 View Post
    USMCA Trump quote from ZH article:

    He added that the deal is “good for China, and our long term relationship,” before adding that “250 Billion Dollars” will be returning to the US thanks to Beijing’s promise to scale up imports.
    -----------

    In other words, China sending dollars back. They don't need them anymore. Trade in Treasuries, receive dollars, send dollars back for real goods. The future is Americans working for the East, instead of the recent history of the other way around. I for one welcome our new Chinese overlords and hope to be of great service. Xiexie.
    LOL

    China will collapse if it loses many more dollars and it will collapse due to further increased tariffs if it doesn't.
    Never attempt to teach a pig to sing; it wastes your time and annoys the pig.

    Robert Heinlein

    Give a man an inch and right away he thinks he's a ruler

    Groucho Marx

    I love mankindÖitís people I canít stand.

    Linus, from the Peanuts comic

    You cannot have liberty without morality and morality without faith

    Alexis de Torqueville

    Those who fail to learn from the past are condemned to repeat it.
    Those who learn from the past are condemned to watch everybody else repeat it

    A Zero Hedge comment



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  34. #89
    Quote Originally Posted by Swordsmyth View Post
    LOL

    China will collapse if it loses many more dollars and it will collapse due to further increased tariffs if it doesn't.
    You're still maintaining the narrative that Chinese pays the tariffs? LOL indeed. Tariffs are a cover story for dollar devaluation, imported goods costing more, that's all.
    "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.

  35. #90
    Quote Originally Posted by devil21 View Post
    USMCA Trump quote from ZH article:

    He added that the deal is “good for China, and our long term relationship,” before adding that “250 Billion Dollars” will be returning to the US thanks to Beijing’s promise to scale up imports.
    -----------

    In other words, China sending dollars back. They don't need them anymore. Trade in Treasuries, receive dollars, send dollars back for real goods. The future is Americans working for the East, instead of the recent history of the other way around. I for one welcome our new Chinese overlords and hope to be of great service. Xiexie.
    China may buy "up to" $250 billion in goods over the next two years. There will still be a trade deficit and dollars will still in net flow to China. The agreement basically takes us back to November in the Trade war. They aren't going to trade in Treasuries and hand the US cash dollars.

    https://www.ft.com/content/a01564ba-...3-9a26f8c3cba4

    The agreement specified that purchases “will be made at market prices based on commercial considerations and that “market conditions” would affect the timing

    Chinese companies would have to want to buy $200 billion worth of more goods from the US for it to actually happen.

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