Posts Tagged ‘QE2’

Var QE2 ett hemligt Fed-program med syfte att rädda utländska banker från konkurs?

Rekommenderar de av er som ännu inte redan läst inlägget från ZeroHedge som på ett mycket övertygande sätt visar på att QE2 med största sannolikhet var ytterligare ett hemligt Fed-program, denna gång med syfte att rädda utländska banker från en kommande konkurs.

Tack vare denna ‘räddningsoperation’ är nu många av dessa utländska (läs europeiska) banker bättre förberedda för den oundvikliga grekiska default som väntar, vilket sannolikt var hela syftet.

Här är ett utdrag från inlägget:

In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to US borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months. QE2 was nothing more (or less) than another European bank rescue operation!

For those who can’t wait for the punchline, here it is. Below we chart the total cash holdings of Foreign-related banks in the US using weekly H.8 data.

Kategorier:Centralbanker Taggar:,

Helgläsning: Federal Reserve kan gå i konkurs – Jim Rickards

Jim Rickards, analytiker vid Omnis Inc, har gjort sig känd på senare tid med sina frispråkiga men välgrundade kommentarer om det finansiella systemet. Jim har en lång kärriär bakom sig och är därmed ingen duvunge, vilket inte går att ta miste på när man tar del av vad han har att säga.

Jim har skrivit en krönika som publicerats på KWN som jag definitivt kan rekommendera som lite skön helgläsning. Jim har analyserat Bens QE2 besked och presenterar, inte oväntat, ett par för Fed provokativa tankar. Inte minst att Federal Reserve kan komma att gå i konkurs genom att dess nominella egna kapital kan eroderas.

Mycket nöje!


No Exit

By James G. Rickards

November 5 (King World News) – Disasters sometimes sneak up in small steps, each of which appears unthreatening at the time but which cumulatively spell collapse. The Fed is leading the United States to ruin in ways that are claimed to be well intentioned and benign viewed in isolation but which take us finally into a locked room reminiscent of the Sartre play “No Exit.”

The Fed has finally embarked on QE2, the best publicized journey since the flight of Balloon Boy to which quantitative easing might well be compared. Of course, quantitative easing, or QE, is just a euphemism for what is really going on. We’ll skip the Orwellian Newspeak of QE and stick to the Oldspeak – printing money.

How does the Fed print money? It’s easy; they simply buy bonds from the market and credit the seller’s bank account with electronic cash that comes out of thin air. When they want to reduce the money supply, they do the opposite; that is, they sell bonds and the buyer’s bank account is reduced by the sale price and that money disappears. So, printing money is just a massive program of bond purchases. The Fed intends to concentrate the current bond buying program in the intermediate sector of 5 to 10-year maturities.

As a result, the Fed is coming to resemble a highly leveraged hedge fund with an inverted pyramid of risky, volatile and junk debt balanced on a slim layer of capital. Recall the Fed owns the Maiden Lane portfolio of junk from Bear Stearns and $1.4 trillion of mortgages whose value is in serious doubt because of strategic defaults, lost notes and halted foreclosures. Treasury notes may be of good credit quality if you don’t mind getting paid back in debased dollars but even Treasury notes have market risk. If interest rates go up, the value of Treasury notes goes down; it’s that simple. The Fed is taking both credit risk and market risk on its balance sheet in unprecedented amounts.

Right now the Fed’s balance sheet shows about $57 billion in total capital. Current assets are about $2.3 trillion. The current money-printing plan will take total assets above $3 trillion. At that level, it only takes a 2% decline in asset values to wipe out the Fed’s capital. Put differently, it only takes a 2% drop in the average value of assets on the Fed’s balance sheet for the Fed to go bankrupt. And this is in an environment where various markets frequently go up and down 3% in a single day.

How risky is the Fed’s program of bond purchases? Very. For those who are not bond traders, here are a few quick pointers. First off, intermediate term securities are more volatile than short-term securities. The Fed traditionally purchases Treasury bills of one-year or less in maturity. Those bills are not volatile at all and don’t move much in price when interest rates change. So, mark-to-market losses are never that great. But 10-year notes are highly volatile and losses can be huge in response to even modest increases in interest rates. Secondly, with the Fed composing such a large part of the Treasury market, liquidity will decrease as fewer participants buy and sell each day due to the Fed’s dominant role. This means bid/offer spreads will widen making it very costly for the Fed to unload their position if they want to. If the Fed is selling, who on earth wants to buy? Finally, there is a concept called “DVO1” which is market jargon for the “dollar value of 1 basis point”. This is a measure of how much a bond goes down in price in response to a 1 basis point increase in interest rates. It happens that DVO1 is greater as interest rates are lower. In other words, the decline in price of a bond in response to a 1 basis point increase in rates is greater when rates are at 1% than if they are at 5%. This element of volatility is independent of the fact that longer maturities are more volatile, so having longer maturities and a low-rate environment is like soaking C4 plastic explosives in nitroglycerine.

When critics raise the issue of mark-to market losses, the Fed has a simple answer, which is that they will hold to maturity. The Fed does not have to mark to market; they can simply hold the assets to maturity and collect the full proceeds from the Treasury or other issuers. Just ignore for the moment the fact that some of the junkier assets and mortgages will not pay off, ever. That’s years away; for now, let’s just give the Fed the benefit of the doubt and say that mark-to-market losses don’t matter because they don’t have to sell.

Critics also raise the issue that this much money printing will result in inflation at best and maybe hyperinflation if velocity takes off due to behavioral shifts. The Fed is also very reassuring on this point. They say not to worry because at the first signs of sustained and rising inflation they will reverse course and reduce the money supply by selling bonds and nip inflation in the bud. But also note that the world in which the Fed wants to sell the bonds is also a world of rising inflation and therefore rising interest rates. This is the world of huge mark to market losses on the bonds themselves.

The Fed is saying don’t worry about mark to market losses because we will hold the bonds. The Fed is saying don’t worry about inflation because we will sell the bonds. Both of those statements cannot be true at the same time. You can hold bonds and you can sell bonds but you can’t do both at once. You will want to sell when rates are going up but that’s when losses will be the greatest. So the time when you most want to sell is the time when you will most want to hold. The Fed may say they can finesse this by selling shorter maturities only to reduce money supply and holding onto longer maturities. But that just further degrades the quality of the Fed’s balance sheet and turns it into a one-way roach motel for highly volatile and junk assets.

So, here’s the bottom line on money printing, or QE if you prefer. If nothing happens, the whole thing was a waste of time. If inflation takes off, the Fed will have to choose between holding bonds and letting inflation get worse or selling bonds and going bankrupt in the process. Since no entity goes down without a fight, the Fed will naturally hold the bonds and let inflation take off. Do not ask about the exit strategy from QE; there is no exit.

Kategorier:QE Taggar:, ,

Marknaden gör narr av Ben efter sitt beslut att förstöra dollarn

Så många underhållande kommentarer och analyser dagen efter Bens chockerande, men långt ifrån oväntade, QE2-paket. Bland de mer underhållande kommer, inte oväntat, från våra frispråkiga vänner på Zero Hedge där man som vanligt inte spar på krutet.

Yesterday’s Ben Bernanke penned an Op-Ed in which he essentially said: ”I am doing whatever I interpret my mandate to be, which right now means only thing: Dow 36,000. I am only accountable to the private bank that is the Federal Reserve, a few Wall Street CEOs, and no one else. Congress has no power over me. Try to stop me.” And while the stock market is so far in love with this exhibition of outright hubris which promises record bonuses even as a record number of Americans subsist on foodstamps and real, not BLS, unemployment is over 20%, putting the Chairman in a long-overdue strait jacket will ultimately require an outright clash between those who still believe in that piece paper called the constitution and the kleptocratic cartel to whom the trade-off between a senior bond impairment and their first born is never all that clear. And while more and more try to educate a hypnotized, strategically defaulting US society what QE2 means to their future, the rest of the world is already rising in a tidal wave of disapproval aimed at the Federal Reserve. As the FT reports, Brazil, China, German, and Thailand, and soon everyone else, have already voiced thighest criticism and their condemnation of this escalation in FX wars.

Här är ett underhållande klipp med David Stockman som var chef för Office of Management and Budget under Reagan där han bland annat säger följande:

”When you tell politicians they can issue $100 billion of debt a month for free, how do you expect them to do the right thing, and ask their constituents to sacrifice… I think the Fed is injecting high grade monetary heroin into the financial system of the world, and one of these days it is going to kill the patient.

Förutom en mängd underhållande kommentarer så gjorde marknaden definitivt narr av Ben med sitt beslut att skicka upp guld nytt all-time-high (1393) och silver exploderade till nytt 30-årshögsta (26,28). Lycka till med att förklara bort detta Ben!

Kategorier:Ädelmetaller, Guld, QE, silver Taggar:, , ,

Ben öppnar pandoras ask

Ben levererade som väntat vad marknaden ville ha, ett saftigt QE-paket på totalt 900 miljarder dollar, inräknat nuvarande återköpsprogram, fram till juni 2011. Ben har onekligen öppnat pandoras ask för nu finns det ingen som helst återvändo. Marknaden kommer att förvänta sig mer stimulanser och jag kan inte se annat än att detta QE-paket kommer att följas av många fler tills dollarn värde i princip helt urholkats.

Här är Jim Sinclairs kommentar:

1. Today’s stand by the Fed is a watershed event.
2. It is so because the Fed opted for quite significant QE ($900 billion) by June in the face of overwhelming objections both nationally and internationally.
3. The Fed will review its activities in light of economic developments. MOPE takes that to mean curtailment with improving economic activity. The real meaning of those words is expansion of QE assuming negative economic developments, which I anticipate.
4. Gold now has a short term number of $1444 on it.
5. It will in my opinion go to $1650 and higher.

Det var underhållande att se hur Federal Reserve via sina banker sänkte guld och silver innan beskedet utan någon sim helst anledning. Dollarn hade bara stärkts blygsamt och på råvarumarknaden var priserna stabila. Luktar desperation. Mycket högre priser är att vänta inom en inte alltför avlägsen framtid.

Kategorier:QE Taggar:, , ,

Inför Feds presentation av QE2

Idag är den stora dagen vi väntat länge på. Dagen då Fed äntligen berättar till vilken hastighet man kommer justera de amerikanska sedelpressarna. Mycket står på spel för vrider man på för mycket kan dollarn kollapsa och vrider man på för lite kommer bl a aktie- och råvarumarknaderna sannolikt att falla kraftigt. En till synes omöjlig balansgång för Ben. Inte undra på att han i princip frågade marknaden hur mycket QE den ville ha i förra veckan.

En sak är dock helt säker, oavsett Bens besked idag. Federal Reserve kommer att låta sedelpressarna gå på högvarv i all oändlighet, eller som Jim Sinclair uttrycker det ‘QE to infinity’. Som vi konstaterade tidigare så är det omöjligt för Ben att avslöja hans verkliga planer för det skulle få dollarn att kollapsa på nolltid. Att planen är att på sikt förstöra dollarn är det dock ingen tvekan om.

Snarare kommer han, liksom tidigare, att istället portionera ut QE3, QE4, QE5 etc samtidigt som han i propagandasyfte emellanåt genomför lite ‘tester’ för att ta bort likviditet från systemet för att skapa illusionen av att man har läget under kontroll. Är det förresten inte ironiskt att man för bara ett halvår sedan i media pratade om hur Federal Reserve bäst skulle ta bort likviditet från systemet medan man nu pratar om hur många biljarder dollar som Fed bör skjuta till i systemet.

Att det är så få som genomskådar detta skådespel är för mig helt otroligt och ett tecken på att vi människor verkligen inte har lärt oss ett skvatt från historien. Man kan skratta hur mycket man vill åt den välkända ‘tulpanbubblan’, men faktum är att den bubbla vi befinner oss i nu är oändligt mycket större och dessutom global.

Vad gäller förväntningarna inför Feds besked så kan jag rekommendera följande inlägg från ZH där Goldman sammanfattar vad marknaden kommer att hålla ett öga på.

Här är ett utdrag:

FOMC Preview—What We Expect on November 3

In this comment, we summarize our key expectations for Wednesday’s FOMC statement. The most prominent one: an announcement of about $500bn in purchases of longer-term Treasury securities over roughly the next six months or an equivalent program expressed at a rate of about $100bn per month, with a clear indication in either case that more will be coming if conditions warrant. This is in addition to the reinvestment program for repayments of agency and MBS principal, which will continue to be directed to the Treasury market. The purchases are apt to tilt toward somewhat longer durations than have been done so far, though information on any such detail may come through a separate New York Fed communication.

Många pratar om att Fed inte kommer att överträffa marknadens förväntningar, vilket kan resultera i en kraftig nedgång som kan dra med sig guld, silver och gruvorna. Skulle så bli fallet så skulle jag rekommendera att drar nytta av detta tillfälle att lasta på er så mycket ni bara kan för sannolikt väntar ett rally utan dess like inom kort.

Kategorier:QE Taggar:,

Fed frågar marknaden om dess förväntningar på storleken på QE2

Priset på guld steg och dollarn föll på torsdagen sedan det framkommit uppgifter om att Federal Reserve skickat ut en enkät till bland annat sina så kallade ‘primary dealers’ (banker som bl a agerar återförsäljare av statspapper) för att ta reda på deras förväntningar på hur mycket statspapper Federal Reserve kommer att köpa de kommande sex månaderna samt vilken effekt köpen väntas få på räntorna.

Här är ett urklipp ur en artikel från Bloomberg:

The New York Fed survey, obtained by Bloomberg News, asks about expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asks firms how often they anticipate the Fed will re- evaluate the program, and to estimate its ultimate size.

Detta är smått chockerande uppgifter och ZH har som vanligt en mycket träffsäker kommentar:

This is nothing short of a stunning indication of three things: i) that the Fed is most likely completely paralyzed due to the escalating confrontation between the Hawks and the Doves, and that not even Bernanke believes has has sufficient clout to prevent what Time magazine has dubbed a potential opening salvo into a chain of events that could lead to civil war: in effect Bernanke will use the PD’s decision as a trump card to the Hawks and say the market will plunge unless at least this much money is printed, ii) that the Fed is effectively asking the Primary Dealers to act as underwriters on whatever announcement the Fed will come up with, and thus prop the market, and, most importantly, iii) that the PDs will most likely demand the highest possible amount, using Goldman’s $2-4 trillion as a benchmark, and not only frontrun the ultimate issuance knowing full well what the syndicate of 18 will decide in advance of what the final amount will be, but will also ramp stocks on November 3 to make the actual QE announcement seem like a surprise.

Kategorier:Guld, QE Taggar:,

Goldman: Fed behöver trycka upp 4 biljarder dollar

Vi börjar närma oss nästa FOMC-möte (3 nov) där Fed väntas tillkännage omfattningen av sitt nya stimulanspaket, QE2. För lite och börserna kommer att rasa och för mycket och guldet kommer att rusa samtidigt som dollarn kraschar. En tuff balansgång med andra ord. Inte undra på att det just nu spekuleras hej vilt med tanke på konsekvenserna. Zero Hedge har snappat upp resonemang från Government Sachs som avslöjar att Fed behöver trycka upp 4 biljarder dollar för att få full effekt.

Här är ett utdrag från ZH:

A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil…

Om ni ser vad som håller på att ske är det inte svårt att föreställa sig vart guldet är på väg.

Kategorier:QE Taggar:,