Posted on 11/14/2012 11:43:18 AM PST by ExxonPatrolUs
In what should be news to precisely nobody (especially our readers, for whom we laid out the next Easing steps very clearly on the day QEternity was announced, including the continuation of Twist after December 31, 2012 at which point the Fed would merely monetize long-dated paper without selling short-end, i.e. unsterilized), the just released FOMC minutes indicated that "a number" of FOMC members favored more (infiniter) QE after the end of Twist. In other words, the Fed will have to continue monetizing the long-end of the Treasury issuance in lieu of other willing buyers. Recall that the Fed is currently buying up all the 10 Year+ gross issuance. To assume that this can change in some way is ludicrous. It also means that going forward, anything less than $85 billion in monthly flow from the Fed will be seen as tightening. Apparently, this update was big news to the algos (and the BIS FX traders) in charge of daytrading the EURUSD, which ramped by 30 pips on the news. Stocks, however, are oddly enough, the rational instrument today, and have barely budged on this news, once again indicating (as shown during yesterday's Yellen comments), that the Fed has priced itself and its future decisions out of the market, also exactly as we predicted would happen minutes after QEternity was announced.
For those who still don't get it, here it is in under 140 characters, from long ago:
@zerohedge: To the market "only" $85 billion in flow a month is no longer enough to sustain euphoria. 24 Oct 12
(Excerpt) Read more at zerohedge.com ...
Market falls another 120 points today.
“Unsterilized monetization”.
Don’t worry!
The market autoclave will roast all of the speculative germs out of the monetary base...or something.
Yep. The Fed said a month or more ago, that ongoing and indefinite QE would be pegged to the unemployment situation.
That would put a stop to the insane borrowing of the Federal and state governments in a hurry as interest rates skyrocketed & governmental borrowing crowded out all other credit.
As it stands, the Fed is the enabler of the spendaholics in DC.
It is hard to inflate the currency when wages are dropping—but that won’t stop the Fed from trying!
[Bloomberg titles and links only—no content allowed to be posted to Free Republic from Bloomberg.]
Dollar Weakens as Fed Minutes Suggest More Bond Buying
http://www.bloomberg.com/news/2012-11-13/euro-trades-near-two-month-low-before-industrial-production-data.html
Fed Says ‘a Number’ on FOMC Saw Need for Additional QE
http://www.bloomberg.com/news/2012-11-14/fed-says-a-number-on-fomc-saw-need-for-additional-qe.html
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