Fed Monetizes 1 Trillion in MBS and Treasuries for 2013

Discussion in 'Economics' started by achilles28, Dec 4, 2012.

  1. The US economy is a joke. The budget deficit is in paper decline because the Federal Reserve announced it will ramp up Treasury purchases by a meager half trillion (45 billion a month), for 2013. What about real estate? Fed will own that market too - 40 Billion in MBS purchases, every month.

    Do the math, between the FED and the deficit, the total borrowing needed to sustain this weak ass economy at ~0% growth is 12.5% of GDP (2 Trillion / 16 Trillion). Listen up!!! This is important! Your Government is borrowing 12.5% of GDP - EVERY YEAR - to keep this economy at break-even.

    Add in the fiscal multiplier (~1.6), and you've got a GDP shortfall of roughly 20%. Twenty-fucking-percent.

    Where did 20 percent of our economy go? It went to China. And India. It built those countries.

    http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html
     
  2. BULL MARKET. Here we come, baby!

    Fake or not matters not



    Investors bid for more than four times the amount of two- year notes the Treasury auctioned last week, matching a record high, data compiled by Bloomberg show.
     
  3. Pretty much.....None of this will end...
     
  4. ktm

    ktm

    All of it is temporary assuming spending is brought under control at some point.

    Everybody lost their minds over TARP. When it was all said and done, the gov't made billions on the deal. The huge profit margin barely got any media play.

    Nobody notices when this kinda stuff goes really well, maybe because we are now a nation of reality tv junkies that would rather watch people get humiliated and throw fits than understand how real world issues usually play out.
     
  5. I would add that at the height of the 2008 recession, the Federal Government ran a deficit of nearly 2 Trillion dollars, which, at the time, was equivalent to roughly 13% of GDP. Today, Government borrowing and Federal Reserve monetization equate to roughly 12.5% GDP.

    In 4 years, the economy hasn't grown one fucking bit. The economy is propped by the same proportion of debt as it was in 2008!!!!!!!
     
  6. Understand how "real world issues play out"? Want a lesson, Son? TARP was only a "success" because the FED controls asset prices via the money supply. You think expanding the balance sheet to 4 Trillion and change might have had an effect on the book value of the crap it bought?????

    As for temporary, ya, okay. We're in year four. The amount of Government borrowing needed to hold up this weak ass economy IS THE EXACT SAME NOW as it was in 2008 = ~13% GDP. There is NO GROWTH.

    US has 4 years before it reaches Spanish, Italian, Portuguese and Greek danger levels. That's it.
     
  7. Tsing Tao

    Tsing Tao

    LOL! Temporary!

    How do you suppose the Fed will be able to unwind it's balance sheet at ANY point in the future?

    You're on drugs if you think this is anything like TARP. Do you realize it takes $85B a month from the Fed just to keep the market floating where it's at now?
     
  8. ktm

    ktm

    Carnival barking and drooling won't get it done...is that what you've been doing since 2008 on this topic?

    Four years is nothing.

    Study some history and you'll see periods of 20-30 years or more where the US economy went nowhere, nor did the markets. You act like this giant real estate bubble popping is supposed to be fixed when, in a year or two?

    Right.
     
  9. ktm

    ktm

    Not true.

    When did I say this is anything like TARP? The only similarity is that it's a gov't program designed to stabilize the economy and start things growing again. That one made money and worked pretty well. So why are so many people angry about the Fed doing what it's doing?

    The FED is making money hand over fist for the gov't every day as we pay ourselves interest. They aren't floating anything with 85B a month. They are buying Treasuries as necessary to keep interest rates at historic lows - and some MBS. The last few auctions have been seriously oversubscribed, so I doubt the Fed is heavily buying when others are doing the job for them.

    I think a lot of you are just short the market and are pissed that it won't drop for you. I see a lot of blaming the Fed for "propping up the market". Look at trimtabs for inflows if you want answers and not rhetoric. There's trillions on the sidelines waiting to be put to work and a lot of funds are buying this market - or at least not selling it with any real zest right now. Believe me, we can and will drop like a stone when the news warrants.
     
  10. piezoe

    piezoe

    thank you. Not that there are not some serious problems to be worked through, but it is nice to hear a voice of reason occasionally.
     
    #10     Dec 4, 2012