Free Markets, Free People


QEIII: It’s ON, bitches! (Text updated with more details)

Ben Bernanke, the Chairman of the Federal Reserve, announced today that the Fed will embark on another round of Quantitative Easing, beginning immediately. The Fed will increase its holdings by an estimated $85 billion per month in securities, about half of which will be long-term Treasury bonds, and the remaining $40 billion or more will be agency mortgage-backed securities. The agency paper will be purchased with new cash, while the long-term Treasuries will be acquired in exchange for short-term Treasury paper, as a continuation of Operation Twist.

There is no ultimate target amount or end date specified for this round of easing. Essentially, the Fed will buy or exchange $1 trillion in securities per year, until chairman Bernanke says to stop. It is completely open-ended. Additionally, the Fed expects to keep interest rates at or near 0% until sometime in 2015.

Let’s be clear about what this announcement means: The Fed will print $500 billion per year in new money, and inject it into the economy by buying agency paper (Freddie Mac, Fannie Mae, et al.), while also flooding the market with $500 billion of short-term paper in exchange for long bonds. That new money is not based on any realistic estimate of economic growth, or economic requirement to expand the money supply. It is pure, Keynesian monetary stimulus.

This will, of course, be done in a completely responsible way, and there is no threat whatsoever that this will cause an increase in inflation, and in any case, the Fed is fully prepared to sterilize this move at any time conditions warrant. Seriously, it’s best for the Fed to do this, and nothing could possibly go wrong.

Some may disagree.

Anyway, here’s some video of the first round of this open-ended QE being implemented:

qeiii

Image via Max Keiser

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Dale Franks
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14 Responses to QEIII: It’s ON, bitches! (Text updated with more details)

  • “…inject it into the economy buy BY buying securities.”
    Otherwise, very good, Dale.
    And we’re looking kinda dooomed….

  • Well, shit.

  • A very deceptive clip. Since the ECB is also printing, there should be TWO kids at the window throwing money out.
    ¬
    Also, 0% interest rates, but we had 2-3% inflation last year and again now…people are losing money by putting it in the bank. VERY UNHEALTHY.

  • WTF!!!!!!

  • Let’s inflate a bubble in the housing market with loose monetary policy.¬† It is not like anything ever went wrong with a policy like that.¬† Ever.¬† /snark
    Let’s bring back subprime and no doc mortgages while we’re at it.¬† They can be bundled into securities and sold to the Fed.¬† It is not like anything ever… ahh, skip it.
     

  • The March of Folly continues.¬† But let’s get this straight, the “independent” Mr Bernanke is doing this because he got his marching orders from his masters in the Banking industry. Since they are in bed with Obama, for better or worse the have to try and prop him up.
    ¬
    But they might be too quick. There is still time for all of this to blow up in their faces.

  • It’s nice to know that us retirees can count on our investments¬†continuing to earn¬†negative real returns. At least now we can plan for our increasing poverty.

    Given that very few ordinary citizens own mortgage-backed securities or treasury securities, this must be the Obama version of trickle-down economics.I like the original version better.

  • I do not agree with this policy, but since the economy has taken a backseat to “Obama’s re-election”, according to Republicans—manifest by their complete lack of attention to job creation (and their uncompromising attention to social issues, like anti-abortion)—it looks like the policy is the only alternative.

    • Stupid is forever.

    • “according to Republicans‚ÄĒmanifest by their complete lack of attention to job creation (and their uncompromising attention to social issues, like anti-abortion)”
      ¬
      Here’s a tip; if you want to know what Republicans think and what their policies are, read and listen to Republicans, not Democrats.

  • I seem to recall that there was no market for those mortgage-backed securities; they were worthless, impossible to place a value on.¬† I guess the ‘experts’ found a way.

  • Unfortunately, Quantitative Easing is now a permanent feature of the Federal Reserve. It will be used in good times as well as bad. At least Americans now know who the Fed is backing in the Presidential election.

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