The Fed Is So Over Quantitative Easing

The Fed's quantitative easing program won't be a trilogy, at least for now, according to The Washington Post:

QE3 is not to be.That’s the conclusion to be drawn from new minutes of the last Federal Reserve policy meeting released Wednesday afternoon. The central bank is on the verge of concluding its purchase of $600 billion in Treasury bonds. The program, known as QE2 because it is the Fed’s second round of “quantitative easing,” has been the Fed’s tool for keeping short-term interest rates near zero to boost the nations’ economy.

The minutes from the late April meeting show there is little appetite among Fed policymakers to launch a new round of bond purchases.

According to the minutes, some members of the Federal Open Market Committee said there “would need to be a significant change in the economic outlook, or the risks to that outlook, before another program of asset purchases would be warranted.”

Without such changes, “the benefits of additional purchases would be unlikely to outweigh the costs,” the minutes said.

A lot of folks thought that was true with the second round. And it turns out they were probably right: Last month, The New York Times reported that the consensus is that the benefits of QE2 were "surprisingly small." 

Lots more on Ben Bernanke's made-up money here

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  • ||

    The central bank is on the verge of concluding its purchase of $600 billion in Treasury bonds.

    Ok, some stupid questions? So how exactly does this buying back take place? To they buy them back with paper dollars? From whom do they purchase this bonds? If the feds are just printing paper to trade for paper, shouldn't that cause or lead to inflation?

  • ||

    [D]o they buy them back with paper dollars?

    More of an accounting entry on the ledger than paper dollars, but the principle is the same. Call them "e-dollars", if you prefer.

  • ||

    I should have gone into accounting.

  • ||

    Deep in the bowels of the Fed, numeralogical necromancers sacrifice virgins and austrian economists to create the soulless and bodyless creature known as Fiat Currency.

    They then, through the kind (but not cheap) offices of their servents at Goldman Sachs take the demon (now in the form of electrons) and transfer it to Dept. of Treasury's electronic account. In return, the Fed wizards recieve a series of numbers representing the flighty nymphs called Bonds.

    After that, the Treasury gnomes spread the fiat currency around in federal paychecks, transfer payments and general corruption.

  • Barry Bonds||

    If I was still on the juice, I'd kick your ass.

  • ||

    That is what I thought.

  • ||

    Ok, some stupid questions? So how exactly does this buying back take place?

    The Treasury holds a bond auction. The Fed goes to the auction, and buys bonds with dollars it has created for the purpose. According to PIMCO, 70% of bonds issued in the last year now reside on the Fed's balance sheet.

    If you want to olde skoole, this is called "monetizing the debt." That, of course, is what third world countries who can't afford PR consultants do, so when the US does it, its called "quantitative easing."

  • Otto||

    Well, when the SHTF, some people can become entrepreneurs, selling $100 Trillion bills - like the guy who sold me $180 T Zimbabwe for $13. If all else fails, there will be other uses for the paper, although some places won't allow them.

  • CrackertyAssCracker||

    I think they usually let someone else do the initial buy. Then they buy them on the "open market". That makes, like, totally just not monetizing the debt. Cause it was all, you know, capitalist and stuff.

  • ||

    Oh, yeah, there's been a real uptick in "anonymous" buying at these auctions. The professionals all figure they are fronts for monetizing the debt.

    There's even speculation that some of the usual bond market buyers have back-end deals to resell what they buy back to the Fed.

  • Mike M.||

    They do, because they're required to do it this way; it's illegal for the Fed to buy from the government directly.

    Most of the big private investors nowadays are buying and then flipping to the Fed days or even hours later for a tiny, but fast and easy profit.

  • Colonel_Angus||

    How can I get in on this?

  • Mike M.||

    Yeah, I sure wish that I could too, but the bond market is one of the biggest and most cutthroat businesses on the face of the earth.

    Buying U.S. notes is really easy, and pretty much anyone can do it. Short selling them for a profit is a different story altogether. I wouldn't jump in that pool unless I had a huge amount of capital to work with.

  • JoshINHB||

    Most of the big private investors nowadays are buying and then flipping to the Fed days or even hours later for a tiny, but fast and easy profit.

    Which is the real reason for all the end of the world talk about not extending the debt limit.

    No new debt = end of the gravy train for primary dealers.

  • ||

    Thanks RC.

  • OO||

    QE3 in Q312. that's the ticketz

  • Almanian||

    I must chuckle at this - well done, OO

  • OO||

    ok im gonna attribute. i heard will cain say that on spitzer's show.

  • Almanian||

    CAPTION:

    "You didn't know the money supply was controlled by The Clapper™, did you?"

  • ||

    Hey Benny, any buyer's remorse? A good purchase?
    Please provide others with your seller feedback.
    Would you purchase from this sellar again?

  • ||

    According to the minutes, some members of the Federal Open Market Committee said there “would need to be a significant change in the economic outlook, or the risks to that outlook, before another program of asset purchases would be warranted.”

    Translation: "If it looks like our boy is going to lose the election, we may need to throw some cash around.

  • GSYSDTL||

    QE2 was pretty damn handy for anyone holding assets. Money seeks a higher return and more money meant more purchasers

  • Mike M.||

    Sorry, but I still don't believe them. If they truly stop buying notes, the interest rates have no choice but to start spiking almost immediately.

  • ||

    Nobody believes "QE" (fancy name for money printing) is over. It's all a guise to try to delay the inevitable. Ponzi Ben needs to keep spinning those plates (i.e. pump up asset prices) or the whole scam comes crashing down.

    http://www.ft.com/intl/cms/s/0.....z1ModgqYOV

  • ||

    What Mike M. said. When the purchaser of 70% of your product exits the market, you have to drop your prices to maintain the same volume. In the bond world, this means you have to raise rates.

    That ain't gonna happen. Some kind of money laundering will be engaged in. The alternative is a spike in rates, credit market lockup, a brutal double dip, unemployment soaring, giant mutant cockroaches roaming a radioactive wasteland, etc.

  • ||

    Wow! A preemptive Conspiracy Theory!

    "Just in case I'm wrong"

  • ||

    Shrike, I think RC was parroting your claims (and teh Bernank) that we needed Q2.

    cuz we needed to avoid:

    a spike in rates, credit market lockup, a brutal double dip, unemployment soaring, giant mutant cockroaches roaming a radioactive wasteland, etc.

    The cockroach line gives away that it was sarcasm.

    Note: sorry for ruining the joke RC but shrike needs to be beat down.

  • The Real Capitalist||

    Shrike, honey, try to keep up. Don't let just everything go over your head.

    But you do failure so well we should be clapping.

  • ||

    Well, if it gets rid of the Ice Capades and that faggoty Riverdance shit, I am all for it.

  • King Clakoorix||

    giant mutant cockroaches roaming a radioactive wasteland

    WOOT!!!

  • Russ 2000||

    The Fed is never going to stop buying Treasury bonds.

    At best it'll reduce its purchases from the current extraordinary highs. If the interest rates on new bonds gets too high, they'll increase purchases again. But it probably won't be for another quarter or two.

    Plus, the Fed has those bad assets it purchased from other banks to deal with. As they take losses (cough) from that the losses will be small because the rest will be made up in new dollar creation.

    In short, the Fed isn't going to severely slow down its printing, it's just going to put those new dollars to other accounting uses.

  • ||

    the Fed’s tool for keeping short-term interest rates near zero to boost the nations’ economy.

    Boost the economy; yeah, right.

    Whatever you do, don't mention interest payments on the national debt.

  • ||

    "The New York Times reported that the consensus is that the benefits of QE2 were "surprisingly small.""

    Surprising to whom?

  • CrackertyAssCracker||

    Ya, if they could show me any benefits, I'd consider them surprisingly large.

  • ||

    Instead of loosing the whole 50k that Shrike's late grandma left him and which he is using for his "professional investor career" he only lost 25K of it.

    With any luck his mom may still convince him to go back to college and finish his bullshit landscape architecture degree.

  • bosty||

    I bet the benefits were predictably significant for members of the Inner Party.

  • ChrisO||

    For his next trick, the Amazing Bernanke will reveal who else besides the Fed he thinks is going to be buying up all those T-Bills.

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