[Rushtalk] Ben's Friend: QE IV Is Coming!
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
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
"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
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
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.
ObombA did not win erection, Trotskite RINO Mitt Romney threw the
election. -- Rush Limbaugh
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