Federal Reserve Succumbs To Election Politics

[g5000]

To aid Obama in his horrific handling of the economy, the Fed is launching QE3 in an attempt to give him a pre-election boost.

It won't work, though. The Fed is firing blanks. They can no longer do anything to provide an economic climate which fosters growth. That's all on Congress and the President, and they all get an F-.


Fed Announces New Round of Bond Buying to Spur Growth

The Federal Reserve opened a new chapter Thursday in its efforts to accelerate the economic recovery, saying that it would expand its holdings of mortgage-backed securities, and potentially undertake other new policies, until unemployment drops sufficiently or inflation rises too fast.

It's those "other new policies" you really need to watch out for. Perhaps the buying of corporate bonds?

Bernanke is setting all kinds of precedents which will bite us in the ass in the long run.

The Fed said that it would add $23 billion of mortgage bonds to its portfolio by the end of September and then announce its plans for October as part of a new process that aims to prioritize the Fed’s economic objectives.

Plan for an October surprise.

The Fed also said, in a statement following a meeting of its policy-making committee, that it now expects to hold short-term interest rates near zero until at least mid-2015, extending the forecast it made in January by about half a year.

Mid-2015. Jesus H. Christ.

The language was intended to make clear that this latest intensification does not solely reflect the Fed’s increased concern about the economy, but also reflects an increased determination to make a more forceful response. It suggests that the Fed is willing to tolerate somewhat higher inflation later to encourage stronger recovery in the coming months, something it once insisted was unthinkable but has gradually come to consider a necessity in order to revive the economy.

Mr. Bernanke has presided over a gradual intensification of the central bank’s stimulus campaign, but the central bank has repeatedly underestimated the depth of the nation’s economic problems, and the unemployment rate has remained stubbornly high.

Mr. Bernanke said last month in Jackson Hole, Wyo., that he was confident such a program would stimulate the economy. Significantly, he also said that he had concluded the likely benefits of such a program would outweigh the potential costs.

Very few people agree.

Investors may still view such promises with skepticism however, because Mr. Bernanke’s term as Fed chairman ends in January 2014.

The Fed press release is here: FRB: Press Release--Federal Reserve issues FOMC statement--September 13, 2012

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

.

 

[g5000]

The Hidden Costs of Monetary Easing - WSJ.com

Since September 2008, the Fed has acquired $1.16 trillion of government securities—in fiscal year 2011 (Oct. 1, 2010-Sept. 30, 2011), the central bank bought 77% of all the additional debt issued by the Treasury. Aside from the monetary impact of these debt purchases, the Fed allowed the federal government to borrow a trillion dollars without raising the external debt of the Treasury and without having to pay net interest on that portion of the debt, since the central bank rebated the interest payments to the Treasury.

When the Fed must, in Chairman Ben Bernanke's words, begin "removing liquidity," by selling bonds, the external debt of the federal government will rise and the Treasury will then have to pay interest on that debt to the public. Selling a trillion dollars of Treasury bonds on the market—at the same time the government is running trillion-dollar annual deficits—will drive up interest rates, crowd out private-sector borrowers and impede the recovery. Debt-service costs to the Treasury will spiral as every 1% increase in federal borrowing costs add $100 billion to the annual budget deficit.

In addition, Operation Twist, by shortening the average maturity date of externally held debt, will require the Treasury to borrow more money sooner when the economy recovers and interest rates start to rise. This too will drive up interest costs and the deficit.

That last paragraph is particularly prescient. The government has become addicted to short term, low interest borrowing. In other words, we have been hooked into using revolving debt. This is more and more literally like using a credit card to finance our government.

Instead of borrowing low interest money for a 30 year term, we are borrowing at 30 day terms. Every American needs to be aware of the near term consequences of this policy. This is not something your grandchildren will suffer for. This is now something YOU will suffer for.

When interest rates begin to rise, the impact will be sudden, deep, and profoundly painful.

.

 

[BreezeWood]

DJIA 13,539.86 +206.51 9/13/12

not everyone sees the Fed's plan as a bad idea ...

 

[Mad Scientist]

DJIA 13,539.86 +206.51 9/13/12

not everyone sees the Fed's plan as a bad idea ...

Banks are using that money to make bets on the Stock Market. That's not a real good Economic Indicator.

 

[PredFan]

To aid Obama in his horrific handling of the economy, the Fed is launching QE3 in an attempt to give him a pre-election boost.

It won't work, though. The Fed is firing blanks. They can no longer do anything to provide an economic climate which fosters growth. That's all on Congress and the President, and they all get an F-.


Fed Announces New Round of Bond Buying to Spur Growth

The Federal Reserve opened a new chapter Thursday in its efforts to accelerate the economic recovery, saying that it would expand its holdings of mortgage-backed securities, and potentially undertake other new policies, until unemployment drops sufficiently or inflation rises too fast.

It's those "other new policies" you really need to watch out for. Perhaps the buying of corporate bonds?

Bernanke is setting all kinds of precedents which will bite us in the ass in the long run.

The Fed said that it would add $23 billion of mortgage bonds to its portfolio by the end of September and then announce its plans for October as part of a new process that aims to prioritize the Fed’s economic objectives.

Plan for an October surprise.




Mid-2015. Jesus H. Christ.









Very few people agree.

Investors may still view such promises with skepticism however, because Mr. Bernanke’s term as Fed chairman ends in January 2014.

The Fed press release is here: FRB: Press Release--Federal Reserve issues FOMC statement--September 13, 2012

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

.

Don't you think it will backfire though?

Seems to me that the US will get it's credit downgraded partly because of this.

 

[TakeAStepBack]

It was only a matter of time.

 

[Oddball]

I'd go hit up the local coin dealers for all the junk coin you can, while there's still time left.

 

[g5000]

DJIA 13,539.86 +206.51 9/13/12

not everyone sees the Fed's plan as a bad idea ...

Every quantitative easing sees a jump in the Dow. When the dollar is weakened, what happens to prices?

They go up. So of course equity prices will rise.

You will also see a jump in metals.

The euphoria over QE3 won't last through the weekend.

.

 

[g5000]

Don't you think it will backfire though?

Seems to me that the US will get it's credit downgraded partly because of this.

That is precisely what I am saying. This monetary easing and short term revolving credit financing will backfire, big time.

.

 

[TakeAStepBack]

Central planning and fiat money doesn't work on any other cylinder than "backfire".

 

[LadyGunSlinger]

Abolish the Fed.. They act as if they're Constitutionally elected to manipulate the economy.. Bernacke is a dumbass..How the hell does he think the housing market is going to effect the unemployment rate??? Buying mortgage backed securities will do what exactly Mr. Bernacke?? I'll tell you what it will result in.. SUPPLY PUSH INFLATION! 40 BILLION MONTHLY IS COMING FROM WHERE??? Your assholes?! PRINT PRINT PRINT.. Moodys already warned us about printing more money.. the fiscal cliff if just over the horizon and the fucking FED thinks it has some ungranted power to do this shit?!

 

[TakeAStepBack]

The federal reserve are abolishing themselves through these policies. Unfortunately, we're going to have to go down with them. But don't ask g5000 to back that idea up. We NEED the Fed, right?

 

[Toro]

To aid Obama in his horrific handling of the economy, the Fed is launching QE3 in an attempt to give him a pre-election boost.

No he's not.

 

[Soggy in NOLA]

Well, if it doesn't work, by all means, do it again and again.

 

[LadyGunSlinger]

The federal reserve are abolishing themselves through these policies. Unfortunately, we're going to have to go down with them. But don't ask g5000 to back that idea up. We NEED the Fed, right?

Fuck the Fed.. Creating a false bubble with printed money- It was the Fed that caused the Great Depression.. doing the same SHIT they're doing today.. Weeding out small banks with their TOO BIG TO FAIL POLICY.. creating a corrupt banking system by abolishing the gold standard and getting big banks to latch on to and become a part of the Fed Reserve Banking system- protecting the large crony banks.. IT'S ALL A FUCKING plot.. CRIMINAL.

 

[Rozman]

I have been saying for some time now....
Any and all action will be taken to get Obama across that goal line come election day...
No shock here at all.

 

[Oddball]

To aid Obama in his horrific handling of the economy, the Fed is launching QE3 in an attempt to give him a pre-election boost.

No he's not.

How else do you 'splain it?...Complete incompetence, perhaps?

 

[Toro]

To aid Obama in his horrific handling of the economy, the Fed is launching QE3 in an attempt to give him a pre-election boost.

No he's not.

How else do you 'splain it?...Complete incompetence, perhaps?

Yes, Obama is incompetent. No, Bernanke isn't doing QE3 to get him re-elected.

 

[LadyGunSlinger]

No he's not.

How else do you 'splain it?...Complete incompetence, perhaps?

Yes, Obama is incompetent. No, Bernanke isn't doing QE3 to get him re-elected.

LOL!! Not solely, you're right but it's one of the reasons.. Bernanke wants to push us quicker toward that inevitable cliff.. he's as much as admitted it.

 

[Oddball]

No he's not.

How else do you 'splain it?...Complete incompetence, perhaps?

Yes, Obama is incompetent. No, Bernanke isn't doing QE3 to get him re-elected.

I was talking about Bernanke too....Incompetent is being charitable.