Fed Undertakes QE3 With $40 Billion MBS Purchases Per Month

San Francisco Chronicle ^ | 09/13/2012 | Joshua Zumbrun

[SeekAndFind]

The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.

“We’re looking for ongoing, sustained improvement in the labor market,” Chairman Ben S. Bernanke said in his press conference today in Washington following the conclusion of a two-day meeting of the Federal Open Market Committee. “There’s not a specific number we have in mind. What we’ve seen in the last six months isn’t it.”

Stocks jumped, sending benchmark indexes to the highest levels since 2007, as the Fed said it will continue buying assets, undertake additional purchases and employ other policy tools as appropriate “if the outlook for the labor market does not improve substantially.”

Bernanke is enlarging his supply of unconventional tools to attack unemployment stuck above 8 percent since February 2009, a situation he called a “grave concern.” The decision immediately provoked a renewed backlash from Republicans, including Senator Bob Corker of Tennessee, who said Bernanke’s policies damage the Fed’s credibility while doing little to spur the economy.

The FOMC also said it would probably hold the federal funds rate near zero “at least through mid-2015.” Since January, the Fed had said the rate was likely to stay low at least through late 2014. The Fed said “a highly accomodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”

[NoLibZone]

As the Media has its focus offshore.

Where was DWS when the flick was posted on YouTube?

[RckyRaCoCo]

I don't know either, but it sounds like the Fed's idea of a twisted "trickle down" method, whereby they feed the banks billions(by way of counterfeit currency) and they(supposedly) pass it down to the consumers. Only problem is, the banks made a lot of bad bets in the past(mortgages, fraudulent security instruments)and use that money to pay those off(with profit of course) before the consumer sees any benefit.

I just got a letter from one of my credit card companies...they were "happy" to announce they have reduced the interest rate to 19.99%...obviously I don't keep any balance with them. Meanwhile my local bank is paying .05% on savings.

They don't call them banksters for noth'n...

[Uncle Chip]

QE3 will be month to month — September, October, and then terminated in November when Obama starts packing up the White House mementos.

[garbanzo]

For some reason, economists believe that the main problem with lending is lack of funds and not the deteriorating state of both public and private balance sheets all around the world. They believe in their own omnipotence and the absolute correctness of their outdated economic theories which are daily contradicted by this stupid thing called “reality”.

[TwelveOfTwenty]

For some reason, they also believe that money will go back into the American economy. Obviously, they have never gone anywhere with cars, to see how half of them are foreign and how much of the money we borrow these days goes out of the country.

Just like the stimulus checks of 2007 and all of the other cash infusions, this will bounce around retail for a while before going to the countries that build the cars and other stuff we buy.

[SeekAndFind]

RE: Obviously, they have never gone anywhere with cars, to see how half of them are foreign

Yes, but don’t they make the Toyota’s, Hyundai’s and Honda’s and yes, even the Volkswagen’s here in the good old US of A?

[Son House]

Yep, now Democrats can play ‘flip these bundle mortgages’ with their new Hedge Funds. Buy low, sell high(to Fed)...

[Son House]

Why Print? Go green, Electronic Funds Transfers go farther...

[familyop]

The Fed is also doing more short-for-long-term swaps and said that it will buy other things (so-called assets), if employment doesn’t increase enough. That’s what’s happening, regardless of what we’d like. True that the debt pile will go higher with uglier consequences, but it’ll buy you more time. Use it wisely.

[Son House]

I’ll be surprised if any boost last a week. All businesses are experiencing a state of extreme distress brought on by Democrats.

When it used to be one or two sectors of the economy could be out of favor, now, any day, any number of businesses may fail.

[AmericanExceptionalist]

Just what we need: another "stimulus."

Never mind the hyperinflation it is very likely to create...

[Almondjoy]

Well two fold.. lower interest rates for the government allow it it to continue to borrow money at really low interest rates and allow it to continue to spend money in massive deficits with very little consquence.

then with low interest rates you have set the bar low.. so in order to attract investment everyone else must lower the bar, companies and and consumers who can borrow at low interest rates may(and may is the key word) be inclined to borrow money that wouldn’t normally borrow and spend it on things. It is this spending that should spur the economy and produce additional econonic activity that would normally occur. Ideally this generates a cascade effect that pushes the economy forward.

So here’s the problem. Most people have a fear of negative economic development on top of higher future tax rates. why invest money or spend it if you in the future you know that your investment will get you little to nowhere and why spend money if you fear that your investments will be worth less in the future and thus cut into your income. If you are less likely to do these things than borrowing does not matter because you aren’t even willing to spend your own money.

[GrouchoTex]

More “funny money” going to the banks is all this is. “kicking the can down the road”.....

[GrouchoTex]

More “funny money” going to the banks is all this is. “kicking the can down the road”.....

[volunbeer]

I believe it was Einstein who said the definition of insanity was doing the same thing over and over while expecting a different result.

Hopefully I got that right, but regardless, you are correct. This is insane.

[supercat]

I don't know either, but it sounds like the Fed's idea of a twisted "trickle down" method,

The amount of wealth that is generated in the economy is largely a function of how much is in the hands of the people who can most effectively convert marginal capital into additional real marginal wealth. Reagan's so-called "trickle-down" economics served to maximize that quantity. The Fed's policies by contrast seek to direct wealth toward those who have shown that they cannot use it wisely or efficiently.

[Little Pig]

Last I checked, there was plenty of money already in circulation, it’s just that no one was actually spending it. Banks have huge reserves of cash, but aren’t lending because the risk is too high. Businesses have stacks of capital, but aren’t spending because they have no confidence that their outlay will provide any benefit. No one needs more money, except the individual, who is left out in the cold as a result, but who needs the cash most of all.

[matt1234]

can someone please explain to me how it is that these "QE" events are supposed to stimulate the economy?

The real goal is NOT to stimulate the economy. The real goal is to delay the collapse so that it occurs on somebody else's watch.

[TwelveOfTwenty]

Yes, but don’t they make the Toyota’s, Hyundai’s and Honda’s and yes, even the Volkswagen’s here in the good old US of A?

They are assembled in the US, with parts shipped from overseas. I don't know what the average percentage of the parts in transplants are American made, but I understand the percentage is improving. That is if you don't include Mazda, which has moved all of their manufacturing back to Japan.

Of course, the profits still go overseas.