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  • Has QE3 Really Come To An End? [View article]
    NetBlue,

    "The purpose of QE was to quantitatively reduce the number of US Treasuries in the market."

    You are mistaking mechanism with "purpose". The purpose was to lower rates, primarily longer term rates. The mechanism was to buy treasuries, thus lowering the required rate of return. Read what Bernanke had to say about the purpose of QE and its primary function in inducing the wealth effect. It is very clear:

    "Lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending," - Bernanke
    Dec 26, 2014. 02:12 PM | Likes Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    Netblue,

    "maybe you didn't notice I said the instrument is redeemed ... that means the principle is returned ... the debt no longer exists"

    You are missing the point completely. It has little to do with the Feds side of things but more to do with the Treasury. How does the US Treasury plan to fill the $775 billion gap without rates rising? Without the Fed stepping in rates will rise dramatically. Again the Fed will be forced to keep buying treasuries.
    Dec 26, 2014. 11:17 AM | Likes Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    Netbluesky,

    "Just so you know, when a US Treasury debt instrument reaches maturity and is redeemed, it is extinguished ... gone ... no longer exists."

    It has to be paid back at maturity. Meaning the US treasury has to give the owner of said note the principle value of said note at maturity. The Fed can't just forgive the debt if that is what you are referring to. That's not how it works. It no longer exists once the debt is paid.

    And, how am I overrating the power of the Fed? They hold the key to the entire global economic system; The mighty $USD. I think you rather underestimate them.

    "You are apparently unaware of the great demand for stable government debt instruments. They are required by banks, pension funds, insurance companies, etc. They also for the bedrock of global savings and international financing."

    The purpose of QE was to lower rates. Primarily longer term rates.
    Dec 25, 2014. 04:25 PM | 1 Like Like |Link to Comment
  • Silver Wheaton: A Review Of The San Dimas Project [View article]
    haleiwahu,

    I humbly disagree with you. Including the recent drop in its share price, SLW at todays price of $19.95/share has returned over 515% since going public. An annual return of over 50%. And that doesn't include dividends. It far outperforms silver. It's been a home run investment for those who hold it long term.

    We need to remember 10 years ago this company went public and had a market cap of $175 million. Today it has a market cap over $7 billion. Always look at the bigger picture.
    Dec 24, 2014. 06:54 PM | 1 Like Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    Netblue,

    The Fed didn't start paying interest on reserves until 2008. It is a very new development in monetary policy and in my view very dangerous and as we know, has led to banks just parking tons of new excess reserves at the Fed. These excess reserves ($2.6 trillion) were created to quickly, that is really the issue. The Fed knew this and is partially why they decided to incentivize banks to keep excess reserves by paying interest.

    The issue is really very simple. If rates go up and the economy improves, the incentive to keep excess reserves at the Fed goes down. Banks then seek other avenues for their reserves outside of the Fed, like actually lending the money. The banks, with the excess reserves, have the ability to create twice the amount of money currently in circulation ($26 trillion). This leads to massive inflation. Much worse than the 1970's. The Fed is straddling a fine line and I don't have the faith that they can contain the mess they made.
    Dec 24, 2014. 03:33 PM | Likes Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    You are exactly right Market,

    I love when people say that even without the Fed the open market would have snapped up trillions in treasuries. It's true except on minor detail; at what interest rate?

    Without the Fed intervention, rates on short term and long term treasuries would be dramatically higher. That is precisely why they began QE in the first place.
    Dec 24, 2014. 11:51 AM | Likes Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    "To reiterate the $675 billion you talked of will simply be returned to Treasury ... the debt is wiped out. "

    I am trying to be diplomatic here. But I mean this sentence pretty much sums up your ignorance on the subject. The government runs a deficit every year, right? 2015 will probably be over a trillion. 2016 probably more based on current spending. The treasury has already announced a funding gap of $775 billion in 2016 (which is probably rosy based on past projections), so if the Fed doesn't roll over the $675 billion the US treasury will have to rely on the open market to sop up $675 billion and an additional $100 billion without affecting rates dramatically. That's not going to happen.

    For illustration purposes, imagine a private company who has $1 billion in debt that comes due in 2016 but they don't have the cash to pay it off. They would most likely go to the bond market and raise the billion or whatever shortfall they have in order to payoff the 2016 notes and extend maturity.

    In short, the Fed will be forced to roll over the $675 billion.
    Dec 24, 2014. 11:34 AM | Likes Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    Netblue,
    " There was NO net change in assets in the marketplace as a result of QE. "

    Yeah it was an asset swap, what's your point?

    Marketplace? First how do you define marketplace? The market really has no boundaries. Even cash sitting as reserves, treasuries and MBSs at the Fed are all part of the market. It draws interest, effects policy, and it effects the bond market.

    It is all a part of the market. This view that a few trillion in USD (which are assets) somehow exists but doesn't exist is just silly. It's been created, its there. People need to stop commenting on monetary policy based on what Paul Krugman and others of his ilk continue to repeat that QE created no net changes in the "marketplace" simply because it was an asset swap. It means nothing. It's a ploy. Hiding behind euphemisms is a dangerous place to be when arguing about monetary policy. It shows that you are merely regurgitating talking points with no original thought.

    Merry Christmas.
    Dec 24, 2014. 11:14 AM | Likes Like |Link to Comment
  • Top 5 Silver Stocks For 2015 [View article]
    622,

    The price is driven by sentiment. I do agree with you on SLW. I am long.
    Dec 21, 2014. 12:36 PM | Likes Like |Link to Comment
  • Top 5 Silver Stocks For 2015 [View article]
    "As to commercial usages, who knows (or really cares). "

    You pretty much lost all credibility as it relates to the precious metal market with that sentence. The precious metals market is not demand or supply driven. There is more physical demand for silver than when it was going to $50. It is sentiment driven.
    Dec 21, 2014. 12:34 PM | 2 Likes Like |Link to Comment
  • Linn Energy Suffers Another Blow [View article]
    Cg,

    I like your thinking...
    Dec 21, 2014. 12:27 PM | 1 Like Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    That is the dirty lie that continues to be perpetuated. They admit they want to boost asset prices and declare it is for the "little guy" with a "401k and a home". That's why they use that language. But what isn't discussed is that the wealthy own a majority of the assets, real estate, stocks, etc. Therefore the Fed is actually making the rich richer. The effect on asset prices is exponential when it comes to the wealthy. The effect on an average middle income American is rather more linear. In the case of the poor who own no assets, the effect is negative. This creates an even wider wealth gap. It's that simple.
    Dec 21, 2014. 12:18 PM | 1 Like Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    Robert,

    The Fed is still buying treasuries. They reinvest interest and maturing notes. What happens when the $675 billion in short term T notes on the Fed's balance sheet matures in 2016? Will the open market beable to suck that up. Not at current rates.

    I guarantee the Fed will reinvest that amount. The size of the balance sheet has left little flexibility on the part of the Fed. It will be perpetual QE. The Fed will continue to grow its balance sheet buying even more treasuries.

    Besides that, the bigger issue is the government funding gap is getting larger again. Meaning the government will need to sell even more treasuries. If the Fed decides not to reinvest, that will put even more upward pressure on interest rates. What happens when there aren't enough buyers? Rates will have to go up right?
    Dec 21, 2014. 12:10 PM | Likes Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    Rob,

    Here is the difference. The created reserves still exist. Are you trying to ignore the existence of reserves created by the Fed? Because the Fed doesn't ignore them since you can clearly see the effect on the Fed's balance sheet. The fact that it is sitting as reserves now and therefore equates to the reserves not existing is illogical. The difference is that Draghi has just been talking about creating more euros. He understands the long term ramifications of such QE policy and he will gladly sit on the sidelines as long as he can.

    You see, the Fed has confused people to the point they can't logically think for themselves. With all this mumbo jumbo about swaps, quantitative easing, considerable time etc. The Fed does not want a strong dollar (deflationary). They want inflation, therefore this recent dollar strength from a logical deduction will be temporary and the Fed will not and cannot raise rates.
    Dec 21, 2014. 11:52 AM | 1 Like Like |Link to Comment
  • Has QE3 Really Come To An End? [View article]
    I think people misunderstand what is going here.

    The Fed clearly stated they wanted asset price inflation. Also referred to as the wealth effect. American's 401k's go up in value, home prices go up in value etc and they go out and spend. This didn't work out the way they planned as many Americans didn't go out and spend as much as they thought. The Fed creates asset price inflation with ZIRP.

    "Lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending," - Bernanke

    Need i say more?

    As it comes down to the actual mechanism (created reserves swapped for treasuries and MBSs), that is something different and will have its own repercussions longer term. The two should not be confused with each other.
    Dec 20, 2014. 08:09 PM | 4 Likes Like |Link to Comment
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