Fed extends monetizing debt through Oct. Hyperinflation here we come!

This worked great for Weimar, how about for us?

Hyperbolic much? It will extend the time-window but NOT adjust the total amount purchased, net impact from previous stance = 0.

So everyone who's throwing out the red thinks it's OK for the federal reserve to fund the nation's debt? Why is $300 billion any more acceptable than $14 trillion? Time will teach you all.

Also today's annoucement is about the ENDING of the fed purchase. The 300B is not new. The lack of another 300 billion is the news. This is the start of the so called "exit strategy".

Why would we have hyperinflation? You make absolutely no sense at all.

Printing money is not necessarily monetizing the debt.

staci86 said: Printing money is not necessarily monetizing the debt.No, monetizing the debt is having the money printers buy treasuries.

cheezedawg said: delzy said: I'm sorry to be so elementary, but what is at issue is the fact that the yields being demanded by our foreign benefactors (primarily China) has increasesd. That is why they are not buying the treasuries and forcing the federal reserve to buy them directly.According to the latest available data, them fer'ners are still buying are debt at about the same rate they have been.
If you know history, you would know that monetization of debt is ALWAYS the last ditch effort of a country's financial collapse. But you all knew that already, didn't you?You act like the Fed hasn't been buying US treasuries to collateralize its liabilities since its inception. Hardly a last ditch effort to avoid some sort of collapse.I'm sorry, you are correct. Our financial problems are a thing of the past and there are no worries on the horizon.

Oh, wait, strike that.

TFA said: The concern, however, is that rates could begin rising despite the Fed's efforts if foreigners suddenly lose confidence in the government's ability to manage its debt burden. In bond markets, prices fell Wednesday after a fairly weak auction of $23 billion in 10-year Treasury notes. The Treasury Department is auctioning a record $75 billion in debt this week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.75 percent from 3.70 percent ahead of the auction results and 3.67 percent late Tuesday. Bond prices jumped Tuesday as stocks fell. Investors will track demand because a drop in buyers could force the government to increase its payout. The resulting rise in rates would raise borrowing costs for the government as well as consumers and businesses, and could end up slowing the economy. The total public debt now stands at $11.6 trillion. Interest payments on the debt cost $452 billion last year, the largest federal spending category after Medicare-Medicaid, Social Security and defense.

delzy said: No, monetizing the debt is having the money printers buy treasuries.
The debt is not being monetized if the Fed's actions remain restricted to short-duration QE.

Monetization and Weimar references are out of place here, because Fed printing is not being used either to service debt that could not otherwise be serviced, or to pay for services not covered through tax receipts and natural borrowing. The government is still selling Treasuries in the open market with acceptable yields, which combined with tax revenue, meets budgeted obligations.

Weimar is a good cautionary tale, but we aren't there yet. Hyperinflationary economics introduce special considerations, including an unwillingness among foreigners to transact in the specified currency, and advancement of short-term purchases by consumers in response to a fear that significant real purchasing power is being lost between the time wages are paid and the time those wages are converted into goods and services. We aren't seeing either, yet.

staci86 said: delzy said: No, monetizing the debt is having the money printers buy treasuries.
The debt is not being monetized if the Fed's actions remain restricted to short-duration QE.

Monetization and Weimar references are out of place here, because Fed printing is not being used either to service debt that could not otherwise be serviced, or to pay for services not covered through tax receipts and natural borrowing. The government is still selling Treasuries in the open market with acceptable yields, which combined with tax revenue, meets budgeted obligations.

Weimar is a good cautionary tale, but we aren't there yet. Hyperinflationary economics introduce special considerations, including an unwillingness among foreigners to transact in the specified currency, and advancement of short-term purchases by consumers in response to a fear that significant real purchasing power is being lost between the time wages are paid and the time those wages are converted into goods and services. We aren't seeing either, yet."Yet"

The Fed is so far out of control at this point, that I wouldn't put anything past them... including the use of hidden accounts to buy treasuries, giving the appearance of strong buying interest at the auctions.

Make no mistake... the second wave of this depression is about to hit. You can tell by the way everyone is seeing 'green shoots' and declaring that we've turned the corner.

The March S&P lows will be taken out within 12 months. I see the Dow below 5,000 by then.

ifyouhavetoask said: "Yet"

The Fed is so far out of control at this point, that I wouldn't put anything past them... including the use of hidden accounts to buy treasuries, giving the appearance of strong buying interest at the auctions.

Make no mistake... the second wave of this depression is about to hit. You can tell by the way everyone is seeing 'green shoots' and declaring that we've turned the corner.

The March S&P lows will be taken out within 12 months. I see the Dow below 5,000 by then.Wow, this thread isn't worthless anymore since IYHTA has shown up.

Seriously I think the second dip downward is quite possible, but it is not guaranteed to happen. And if it does happen, it would be due to exhaustion of the stimulus money and a runup of oil price to over $100. But even if it does materialize (as the W shaped recovery I even talked about), the second bottom will be shallower than the first one (which is named the great recession).

ifyouhavetoask said: The March S&P lows will be taken out within 12 months. I see the Dow below 5,000 by then.

Not to argue the actual prediction here, but is it the same crystal ball telling you numbers now as the one you used 18 months ago to predict that GE will go down to $5 (in 12 months)? If so, is it fair to assume 15% margin of error at the very least or should we take your statements as absolute, just like you make them sound?

EDIT: Added the 12 month stat.

cheezedawg said: The Fed is not funding the nation's debt. The $300 billion that they are buying this year will _almost_ bring them back to the same level of treasury holdings that they had in 2005. The liquidation of these assets during 2007-2008 while they scrambled to deal with the financial crisis is the anomaly, not the fact that they are rebuilding their portfolio.

Or do you somehow think that it would be better for the Fed to hold private assets as collateral for their liabilities?

You are right that the Fed Treasury holdings have fallen from before and buying more Treasuries will get them back to where they were before the crisis started.

But from these correct facts, your conclusions are wrong.

The Fed didn't sell those Treasuries to the Government (demonitizing debt). It exchanged those for ABS/MBS/Commercial paper/Student loans and a lot of other collateral that the banks gave the Fed in return for Treasuries.

Now if the Fed buys more Treasuries, they are really monetizing new Federal debt, not getting back to the same level of debt monetization that was there before.

What matters is the total size of the Fed balance sheet; not just how much of that balance sheet is held in terms of Treasuries.

However, I believe the Fed will reduce its balance sheet when it can, and may be able to avert hyperinflation.

Anakin

delzy said: ifyouhavetoask said: The Fed is so far out of control at this point, that I wouldn't put anything past them... including the use of hidden accounts to buy treasuries, giving the appearance of strong buying interest at the auctions. What do you think the story was behind the Japanese smugglers that got caught with $134 Billion in treasury bonds? The central banks are running their hard paper assets around to each other for a number of reasons ranging from reserve requirements to hiding insolvency. Why do you think this story just "went away"?

Still, the majority on this board think that anyone who mistrusts the central banks is some kind of tin-foil hatted nut. I guess in the end, we'll all know whether it's on the up and up or not. I just wonder how long it will take.

ROFL.

http://www.google.com/hostednews/afp/article/ALeqM5hOtga422Z7O3Z...

pier0188 said: delzy said: ifyouhavetoask said: The Fed is so far out of control at this point, that I wouldn't put anything past them... including the use of hidden accounts to buy treasuries, giving the appearance of strong buying interest at the auctions. What do you think the story was behind the Japanese smugglers that got caught with $134 Billion in treasury bonds? The central banks are running their hard paper assets around to each other for a number of reasons ranging from reserve requirements to hiding insolvency. Why do you think this story just "went away"?

Still, the majority on this board think that anyone who mistrusts the central banks is some kind of tin-foil hatted nut. I guess in the end, we'll all know whether it's on the up and up or not. I just wonder how long it will take.

ROFL.

http://www.google.com/hostednews/afp/article/ALeqM5hOtga422Z7O3Z...Well, obviously those news stories are bogus, because everybody knows that those notes were real and that there is a giant conspiracy run by the Fed to destroy the country. I think Colonel Sanders is behind it, with his wee beady little eyes.

Crap, I think I just heard some footsteps on my roof. Must be some agents dropping from a black helicopter. I'm heading for my bunker -- if you don't hear from me, make sure the world hears my story!!!!

anakinskywalker said: You are right that the Fed Treasury holdings have fallen from before and buying more Treasuries will get them back to where they were before the crisis started.

But from these correct facts, your conclusions are wrong.I don't think I made the conclusions that you think I did. My post was in response to the assertion that the Fed is financing the government's deficit. They haven't been accumulating an abnormally large amount of government debt, which is what they would be doing if they were directly monetizing the deficit.

Your points about the size of the Fed's balance sheet are of course valid. However, their new policy tool of paying interest on reserves is a powerful one, and it gives them the ability to avert large scale inflation without reducing it's balance sheet.

delzy said: They are. This doesn't even account for all the mortgage backed securities they are buying.It has been clear from the start that the Fed has no intention of holding these private assets any longer than they need to. These programs will unwind, and the as-of-yet-used money created by them will disappear.

Why do you all continue to support these guys who have ruined us financially?Since when have we been ruined financially?

laxlaw said: What should we do with our money/savings?

Buy gold & silver. Boy the smell of those who oppress us is strong here.
http://www.lewrockwell.com/orig10/voorhees1.1.1.html

delzy said: Apparently, some analysts are economics dopes just like me.

Yes. Yes they are.

And what is being neglected here is that the treasuries will stil be sold to primary buyers but the catch is the way they are buying them back just days after the Treasury pushes them out the front door and then Fed is assuming them in the back door (ok, make ou r cdirty comment, lolz)

Here is a link:

http://www.chrismartenson.com/blog/fed-buys-last-weeks-treasury-auction/23880

cheezedawg said: nycll said: cheezedawg said: nycll said: I am convinced you guys miss the main point. The amount of interest earned on the reserves is TINY in the money base. However, it is NOT TINY in banks profits.There is no doubt that this is a gift to the banks. Of course they are going to love risk-free profits. But it is not a gift without some benefits for us as it does provide a powerful tool for implementing monetary policy....even if it encourages reserve hoarding, which partially neutralizes ZIRP? But thanks for the response.The point of the policy tool is to be able to encourage/discourage reserve hoarding at will, so I don't really see how this is an argument against it.Then my main question to this policy (RIR) was that apparently it encouraged reserved hoarding, or at least rewarded reserve hoarding, because you can argue even with no interest the banks wouldn't have lent anyways), at a time when the economy needs the opposite of reserve hoarding.