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FOMC Announcement: QE3 is on to the tune of an open-ended pledge to buy $40B in MBS per month....
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Thursday, September 13, 2012, 12:32 PM ETFOMC Announcement: QE3 is on to the tune of an open-ended pledge to buy $40B in MBS per month. The pledge to keep rates extraordinarily low is extended until mid-2015.
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"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.
"In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."
Continuing to add to the bond purchase program is akin to pushing on a string.
Money printing is all they know how to do. We will get QE to infinity before we collapse.
After a year the far end moved back to a normal range and economic growth began to pick up.
We are doing the exact opposite.
Stunningly pathetic.
Gas was $3.99 yesterday...
And, other than pumping the stock bubble a little bigger, it's not going to help the real economy anyway.
"As a result, central bankers in the United States, and those in other advanced economies facing similar problems, have been in the process of learning by doing."
What do you take from that statment?
I'm still right.
If Ben and any of the Greenspan-alike inflation dove potential replacements weren't on the job we might have purged the system of all the bad debts 5 years ago and now be back to a healthy economy.
If Ben wasn't on the job we might not be capitulating to our financial overlords, handing our currency over to them so that they can lend us money at interest.
If Ben wasn't on the job? Man, I can only dream.
D
http://seekingalpha.co...
Go read the press release again.
That is the difference between using printed money to pay debt as opposed to any manner of projects benefiting society with new jobs and the positive results of the work done.
Good land this is irresponsible reporting.
Quantitative easing (QE) is an unconventional[1][2] monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions with newly created money, in order to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to keep market interest rates at a specified target value.[3][4][5][6] Quantitative easing increases the excess reserves of the banks, and raises the prices of the financial assets bought, which lowers their yield.[7]
"Central banks tend to use quantitative easing when interest rates have already been lowered to near 0% levels and have failed to produce the desired effect. The major risk of quantitative easing is that, although more money is floating around, there is still a fixed amount of goods for sale. This will eventually lead to higher prices or inflation."
A Fed policy of ZERO interest rates does not make up for anti-business policies coming from DC.
US wholesale prices in sudden surge
By Anjli Raval in New York
Wholesale prices in the US rose the most in three years in August as food and energy costs jumped.
The labour department said its producer price index rose 1.7 per cent on a seasonally adjusted basis last month, the largest gain since June 2009, after increasing 0.3 per cent in July.
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Good Job Ben! Massive inflation just as food and energy make their biggest jump in three years!
All SA readers - fill your gas tanks on the way home tonight - this will be the cheapest gas you see for a long, long time.
Buying more MBS will also encourage reckless lending from the bank. Now there is a place to sell that junk again.
There is a even bigger bubble than 2008 underway.
Actually, Bernanke had no choice. If Big Ben hadn't launched QE3 today, the Fed would have developed the same credibility gap that haunts Mario Draghi.
So let's talk some numbers. S&P to what 1600? 1700?
Gold to $2000? $2500?
Oil to $130, $140, $150?
Gasoline to $5, $6?
Might also start Prepping alittle as well....This hole is too deep to get out of imho...
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I had the numbers somewhere but the average interest rate on US Government debt is somewhere near 2.7%. A 1% move in the average interest rate would add close to $160 billion to the federal deficit.
Also, Bernanke is really putting him and the Fed on the line by making this political. To Republicans that were previously sympathetic to the Fed, such as Romney and his followers, the Fed is now seen as directly funding the Obama reelection campaign. If Romney has any balls and is ready to play, he should make direct statements against the Fed intervention and say what he is going to do about them when he gets put in office. I suspect you'll see a strong push for him then.
"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."
Helicopter BEN at his finest!
"If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."
On second thought, the $40B/m may not be there forever, because there will be $90B/m, $150/m.
Get use to it, don't run against the upcoming bull. It seems like the bull will keep on running for awhile. It doesn't mean QE is good for the economy or the people. but the market likes it.
just look at how much change people got from Occupy Wall Street. Nothing!Nobody cares about the middle class.
Crude oil moving on QE is purely speculative long positions and doesn't reflect real supply and demand.
Eventually supply/demand will have to assert itself. But I'm not holding my breath.
10 year is 2%
You can and should borrow all day long under those conditions. And maintaining those conditions means that this awful slack we have in the economy will be used without a World War.
Destruction of productive capacity is ultimately is inflationary and will damage future living standards. Precenting that is key - so keeping the economy ticking over - by any means - is preferable.
Check your politics at the door. Lose your debt aversion. This move makes it more likely you wil be able to pay off in the future. Not less likely. The economy and its potantial is the most important.
Bernanke is doing the right thing. I am not a fan of Obama and yes he must go - but Bernanke is not the problem. He is a big part of the solution.
Bernanke for President
P
There is very little lending out there for anyone looking for less than about $1m. As in, the vast majority of the middle class for example.
Bernanke didn't do what he really need to do...... start making interest rates negative for banks that park their reserves at the Fed (i.e. the banks start paying the fed for the privilege of parking their money there). That will make the pace of lending pick up real quick. Right now, banks get access to cheap money and get to lend it out and keep the spread. Even an idiot can make a profit like that.
Easier to be a puppet-master behind the scenes for the most part, but then again he has his own puppet-masters ttoo if you haven't realized that Jamie D and alike pull his strings.