SW Richmond

Crossing the Rubicon: Monetizing the Long Bond

Nothing moves in a straight line, except Bernie Madoff.

Bernanke makes numerous references to 'credible threats', AKA jawboning the markets, in his pieces on fighting deflation. He acknowledges that to remain credible, these threats must be backed up by action. The pressure on the Fed to directly intervene in the long Treasury market is building. Anyway, since they have 'credibly threatened' to buy mortgage debt, the markets have been complaining that they've only bought $50 Billion of the $500 Billion promised.

If you want an answer (which you are free to not consider a serious attempt) then I suggest you read my earlier article here:

seekingalpha.com/artic...

I believe now that my earlier estimates are low, and that the Fed's balance sheet will approach $8 Trillion within a few years.



On Feb 03 01:39 PM mark glennon wrote:

> Baloney. Tens of trillions of liquid wealth have been erased, yet
> Ben's helicopters have created only about two trillion new dollars
> -- and the Fed balance sheet has actually shrunk a bit in the last
> few weeks. Merely talking about Fed purchases of GSE debt, which
> Ben did a few weeks ago, was hugely successful because it knocked
> down mortgage rates. Questions of degree matter. Yes, unrestrained
> Fed purchases would be a disaster, but nobody proposes that and you
> are attacking a straw man. The Fed has always bought and carried
> treasury obligations to some extent. The question is how much more
> is prudent in this circumstance. This article, like so many others,
> make no serious attempt at the answer.

Crossing the Rubicon: Monetizing the Long Bond

You may be correct. After additional digging I found this article
www.telegraph.co.uk/fi...
which adds the detail that "The Bank said it will still publish details of its balance sheet, but, significantly, the data – the main indicator of the extent of quantitative easing – will not be presented until more than a month has elapsed."

Was this information included in a later update to the news release? I don't recall seeing it, and the article above has been "updated".

On Jan 22 02:56 PM Stevie b. wrote:

> "Now BoE can print all it wants in order to reinflate the UK bank
> system, and no one need know just how much new money there is. How
> can anyone judge dilution when there are no numbers on which to make
> judgment?"
>
> Methinks you exaggerate a tad. They've just changed the reporting
> period - there will still be numbers.

Crossing the Rubicon: Monetizing the Long Bond

LJS,

I want to be optimistic, I have two teenagers. I won't give up hope, but my optimism has fled. BTW, I'm still trying to get through "Man,Economy, and State".


kelm,

There is widespread belief that the US government can't / won't default. It's possible that the USD will be the last refuge short of PM's. Just recently we have seen evidence of gold and USD moving in tandem and some new flirtation with gold backwardation. This may be in response to the building UK banking crisis. I think it is.


Smarty,

I know he's going to do it, I just wish he wouldn't, because I know what happens next.