[Rushtalk] Ben's Friend: QE IV Is Coming!

Carl Spitzer Winblows at lavabit.com
Mon Jan 7 15:51:48 MST 2013

Ben's Friend: QE IV Is Coming!

by Charles Goyette
Saturday, December 1, 2012 

Quantitative Easing III, the much-talked-about "QE-Infinity" 
initiative announced in September, is still so new that it 
barely shows up as a blip on a chart of the Federal 
Reserve's monetary base.

This $40-billion-a-month, mortgage-backed-securities-buying 
program is not yet a pimple compared to the metastasized 
monetary malignancies that were QE I and QE II.

And yet, it looks like QE IV is already on the agenda at the 
central bank's monetary policy-making arm, the Federal Open 
Market Committee. After all, the Fed's "Operation Twist" — 
the $45 billion-a-month swapping of short-term securities 
for longer-term debt — is set to go away at year-end.

As Bush White House economic adviser Lawrence Lindsey said, 
"At $85 billion a month in purchases, the Fed is buying the 
entire deficit."

What would happen if we "just" went back to the Fed buying 
$40 billion in securities a month? According to the man who 
many say has a direct pipeline to the inside thinking at the 
Fed, we might not have a chance to find out.

What's the Fed's Next Move? Find out from the ‘Real' 

The Wall Street Journal's chief economics correspondent, Jon 
Hilsenrath, is thought by many to have a pretty good 
pipeline to Ben Bernanke and others at the Fed.

In July — weeks before QE III was announced —Stephen Roach, 
Yale professor and former chairman of Morgan Stanley Asia, 
assured Bloomberg TV viewers that it was coming, quipping,

"They [The Fed] have gone about their usual pre-FOMC 
leak frenzy where they talk to this reporter and that 
reporter. Jon Hilsenrath is actually the chairman of the 
Fed. When he writes something in the Wall Street Journal, 
Bernanke has no choice but to deliver on what he wrote.

"...The point is, when they plant a story in the Wall 
Street Journal, and this story has been planted. Jon 
Hilsenrath is the weed that grows ... the guy has a perfect 
track record ..."

Now in a Nov. 28 piece headlined, "Fed Stimulus Likely in 
2013: Bond Buying Is Expected to Continue in Effort to Spur 
Slow-Growing Economy," the Fed's go-to journalist suggests 
that the central bank intends to kick its money-printing 
machinery into overdrive in 2013 with QE IV.

The column can be read to telegraph that a "go" decision 
could be made at the Fed's next meeting on Dec. 11-12, with 
Hilsenrath describing it as a "critical issue" on the agenda 
for the meeting:

"The most pressing (issue) is whether to move forward 
with bond-buying programs in which the Fed is accumulating 
immense stockpiles of long-term mortgage-backed securities 
and Treasury bonds. The bond-purchase programs are meant to 
drive down borrowing costs, and in turn boost the prices of 
assets like stocks and homes, and stimulate hiring, spending 
and investment.

"The Fed signaled strongly in September that it was 
inclined to sustain these programs. And markets have 
anticipated some combination of bond purchases will continue 
next year. Several Fed policy-makers have suggested in 
recent interviews and public speeches that they support more 
bond-buying. At their meeting next month, officials will 
debate extending the programs and hear staff presentations 
on their impact."

That's pretty definitive in the view of experienced Wall 
Street hands like Dr. Ed Yardeni, the president of Yardeni 
Research, who was among the first to correctly identify it 
as QE IV.

His reaction to the WSJ column noted that, despite the 
Fiscal Cliff, Washington will continue to run "insane" 
deficits and that "the Fed and other central banks will 
continue to enable this insanity by purchasing lots of U.S. 

Consider the historical blow-off inflations from France 
during the Reign of Terror, to Weimar Germany, and the more-
recent episodes in banana republics.

Those who have studied them have often wondered how a little 
inflation ... just a bit of money-printing ... only a modest 
amount of debt monetization ... ever gets out of hand and 
becomes a currency-collapsing event.

In such episodes, it generally turns out that the monetary 
authorities have believed ... until it's far too late ... 
that they could rein in the destructive forces they 

They can't.

Can the Fed Ever Return the Monetary Genie to the Bottle?

The results of money-printing binges can be delayed. A 
reckoning can sometimes be put off for a while. But it is 
magical thinking to believe that the Fed can buy $900 
billion of toxic mortgage securities from the influential 
banks and $1 trillion in U.S. government bonds, with money 
it has created of thin air, and that there will be no 
economic consequences.

Only in Washington — and in certain Princeton and other 
academic economic circles — can such fantasies be 

Speaking of Washington, now that we know about the monetary 
authorities' magical thinking, what about the fiscal 
authorities and their fantasies?

I'm sorry to report that they are every bit as dangerously 
unhinged from reality.

Exhibit A would be Tim Geithner. The Treasury secretary 
recently appeared on Bloomberg TV urging that the statutory 
ceiling on federal debt be eliminated entirely.

"The sooner the better," said Geithner.

Oh, my!

Got gold?

ObombA did not win erection, Trotskite RINO Mitt Romney threw the
election.  -- Rush Limbaugh
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