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Did The Fed Lie About QE 3 And 4?
TMO ^ | 1-5-2012 | Graham Summers

Posted on 01/05/2013 2:46:34 PM PST by blam

Did The Fed Lie About QE 3 And 4?

Stock-Markets / Quantitative Easing
Jan 05, 2013 - 08:24 AM
By: Graham Summers

It’s common belief that Bernanke and the Fed are printing $85 billion per month ($40 billion to buy Mortgage Backed Securities and $45 billion to buy Treasuries). After all, these are the policies that the Fed announced in September and December 2012, respectively.

The only issue with this is that the Fed lied.

Today, the Fed’s balance sheet is $1.3 billion smaller than it was at this time last year. Last week it was $19 billion smaller. The largest year over year growth the Fed balance sheet has shown since QE 3 was announced occurred on November 23, 2012 when the Fed balance sheet was a mere $48 billion larger than it was at the same point in 2011.

Since that time the Fed balance sheet has shrunken year over year.

The implications of this are severe. If the Fed is indeed not employing the policies it announces but is simply engaging in verbal intervention (stating it will do something just so the markets react), then it has lost total credibility as a monetary authority and is nothing more than a market manipulator.

Consider the above chart… the S&P 500 today is 14% higher than it was this time last year. Over the same time period, the Fed’s balance sheet has shrunken. This is proof positive that stocks have not only disconnected from economic fundamentals… but are now disconnected from the Fed’s actual actions.

Put another way, stock investors are now bullish based on their belief that the Fed is pumping $85 billion in the system every month and nothing more.

Not every asset class is this mindless. Consider Gold’s recent action:

Considering that the Fed announced QE 3 in September and QE 4 in December, Gold should be soaring. Instead it peaked right around the time QE 3 was announced and has since fallen. Year over year it’s barely higher.

All of this adds yet more evidence that the Fed is in fact running out of ammo. We already knew that the Fed believed in verbal intervention as a tool for dealing with the markets. But now it’s clear that this is the primary tool for the Fed. This hardly bodes well for the financial system.


TOPICS: News/Current Events
KEYWORDS: authorondrugs; bsarticle; cookedthebooks; cultureofcorruption; economy; feds; investing; marketvseconomy; marketvsthefed; obamaeconomy; obamascandals; qe

1 posted on 01/05/2013 2:46:51 PM PST by blam
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To: blam

..a young Bernanke

2 posted on 01/05/2013 3:03:04 PM PST by Doogle (USAF.68-73..8th TFW Ubon Thailand..never store a threat you should have eliminated))
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To: blam

I get that the Fed lied, potentially.

But, if they didn’t actually conduct any QE, wouldn’t that be a good thing long-term?

And wouldn’t that indicate the economy is stronger than we’ve been led to believe?


3 posted on 01/05/2013 3:07:02 PM PST by EBH (0bama is guilty of willful neglect of duty.)
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To: Doogle

I loved “Our Gang” on Saturday mornings!


4 posted on 01/05/2013 3:07:02 PM PST by exnavy (Fish or cut bait ...Got ammo, Godspeed!)
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To: blam
Uh, uhm, what was the question?

FMCDH(BITS)

5 posted on 01/05/2013 3:11:19 PM PST by nothingnew (I fear for my Republic due to marxist influence in our government. Open eyes/see)
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To: Doogle


6 posted on 01/05/2013 3:21:09 PM PST by Chode (American Hedonist - *DTOM* -ww- NO Pity for the LAZY)
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To: blam

Yes, they announced those new programs, but at the same time other programs also came to an end, securities on the balance sheet matured, etc. The Fed has been completely transparent about what it’s buying when and how much, but Mr. Graham Summers is too lazy to bother keeping track of it.

Also to say that the broad stock market is reacting, or failing to react, to one single component of the economic landscape is utterly vapid.


7 posted on 01/05/2013 3:35:08 PM PST by babble-on
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To: EBH

to prove it, they would have to admit they lied...


8 posted on 01/05/2013 3:35:50 PM PST by stylin19a (Obama - Fredo smart)
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To: babble-on

Feds cannot pull back. 40 percent of our T bill auction is paid with printed money. The T Bills are used to fund the 1.4 to 1.6 Trillion shortfall in our fed budget. Cheap money is keeping our banks afloat buying time against the derivative time bomb. Unless the fed knows something we don’t they cannot pull back from QE. We will end up like Japan, QE to infinity. Which brings up another point. Japan is the largest foreign purchaser of T Bills. Under their new PM Abe, he plans to buy more Japanese T Bills. The Japanese savings are tapped out, Japan may need to liquidate some of their US T Bills to fund their own QE. That means the fed will have to print more money to make up future Japanese cutback in buying US T Bills. The fed announcement of maybe stopping QE is just manipulation of the market via public announcements. The dip in gold and silver prices is a good time to buy more. Fed is not stopping QE unless they want to crash the banks, US economy or Congress will reduce the deficit overnight.


9 posted on 01/05/2013 4:02:31 PM PST by Fee
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Support Free Republic

10 posted on 01/05/2013 4:09:25 PM PST by RedMDer (Those that believe in gun free zones should put GUN FREE ZONE on their property and persons.)
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To: Fee
Feds cannot pull back. 40 percent of our T bill auction is paid with printed money.

If the Fed's balance sheet has not grown, they are not financing any of Obama's new debt.

Cheap money is keeping our banks afloat buying time against the derivative time bomb.

Banks aren't borrowing any cheap money from the Fed. What "derivative time bomb"?

The Japanese savings are tapped out, Japan may need to liquidate some of their US T Bills to fund their own QE.

QE occurs when you print your own money, no need to fund it with our T-Bills.

11 posted on 01/05/2013 4:28:13 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot

Look up Chris Whalen on youtube if you do not know what a derivative time bomb is. There is so much info on it. Surprise you do not know anything about it. World is playing with 1500 trillion worth, which the US is involve with 700 trillion. Many of the transactions are done in shadow banking and not regulated in open, Why do you think the EU and US is desperate to not let Greece default? Greek GDP is very small in EU and the cost of default can be absorb by EU nations. Problem is no one knows what all the interlocking banks are on the hook for in the world of derivatives, SWAPS and etc that may be triggered by a Greek default. I think the US Fed knows. So far the Fed has practiced neutral QE, the new QE replaces the old maturing QE, but they cannot eliminate the QE unless they want to implode the financial system. The Fed is simply buying time for our economy and hope the economy on its own recovers or gov reduces deficit spending. In the mean time other nations are pursuing their own financial interests and needs. China is slinking away from T Bill purchases and Japan may do the same to finance their own aggressive QE. Someone needs to make up the T Bill shortfalls. Fed will need to create money, give to US banks to buy US T Bills, and sell it back to the Fed. That is the paper currency world we are living in. We are stuck in QE unless we go to war. Jim Rickards is the other guy you need to look up on youtube.


12 posted on 01/05/2013 5:30:44 PM PST by Fee
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To: Fee
Surprise you do not know anything about it.

I know plenty about derivatives, not much about the imaginary time bomb.

World is playing with 1500 trillion worth

Yeah, notional values are very big. So what?

Problem is no one knows what all the interlocking banks are on the hook for in the world of derivatives,

Net, the derivatives are worth zero.

Fed will need to create money, give to US banks to buy US T Bills, and sell it back to the Fed.

But the Fed's balance sheet hasn't grown. The Fed hadn't bought anything, over the last year, according to the article above.

13 posted on 01/05/2013 5:58:57 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: EBH
But, if they didn’t actually conduct any QE, wouldn’t that be a good thing long-term? And wouldn’t that indicate the economy is stronger than we’ve been led to believe?

Don't know, but it seems like something is seriously amiss if the Markets are being buoyed by the thought that devalued money is pouring into the coffers - it might mean that the money boosting it up is worth even less than the scrip that they thought was going in. Could cause a real crisis soon if true and there have been stories hinting at making the Dollar collapse as being the big strategy.

14 posted on 01/06/2013 3:07:07 AM PST by trebb (Allies no longer trust us. Enemies no longer fear us.)
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To: blam

I don’t know where this author gets his facts, but everything I look at says the Fed’s balance sheet has gone from around $775 Billion in 2007 to $2.9 Trillion at the end of 2012...no sign of “staying the same” or “going down”.

http://blogs.wsj.com/economics/2012/09/13/a-look-inside-the-feds-balance-sheet-15/

http://www.federalreserve.gov/releases/h41/current/h41.htm


15 posted on 01/06/2013 3:30:00 AM PST by Drago
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To: Fee

Bfl


16 posted on 01/06/2013 6:24:03 AM PST by FreedomPoster (Islam delenda est)
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To: Drago
I don’t know where this author gets his facts

Look here....

Today, the Fed’s balance sheet is $1.3 billion smaller than it was at this time last year. Last week it was $19 billion smaller. The largest year over year growth the Fed balance sheet has shown since QE 3 was announced occurred on November 23, 2012 when the Fed balance sheet was a mere $48 billion larger than it was at the same point in 2011.

He's talking about end of 2011 compared to end of 2012.

17 posted on 01/06/2013 9:09:10 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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