The Fed Decides "Bending the Logical Rules of Supply and Demand" is Totally Part of Its "Exit Strategy"
Pic credit: Chico Town (?)
(h/t WC Varones)
I too am curious to hear who, exactly, Ben Bernanke thinks will buy these Treasurys. In the back door and out the front... the money laundering continues. The Dirty Fed seems to believe that it can somehow juggle the money around enough to make it "clean". LOL! Give me a break, I've seen enough gay porn in my day to know exactly what a circle jerk looks like. What else do you call giving Goldman Sachs $10 billion it doesn't need and then demanding it back? There's a chart, WCV made it extra helpful for all of you to see the process in action in useful picture form.
Federal Reserve officials are considering a proposal to schedule limited sales of bonds from the central bank’s $2.2 trillion balance sheet as part of a range of tools for withdrawing record monetary stimulus.
The Federal Open Market Committee discussed asset sales at its November meeting, with some members in favor and others warning that it would cause “sharp increases” in longer-term interest rates, according to minutes of the meeting released Nov. 24. A middle route now being studied would allow small amounts of bonds to be unloaded at announced times.
“The attitude toward asset sales is changing in terms of more in favor and more open minded, and doing it very gradually,” said former Fed Governor Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington. Devising a plan for pulling back stimulus “is under way intensively on the Federal Open Market Committee,” he said.
Chairman Ben S. Bernanke is trying to wind down emergency stimulus programs that helped avert a second Great Depression, while alleviating concerns that inflation will accelerate as the economy picks up. U.S. Treasury securities posted their worst performance since the 1970s after the Obama administration borrowed record sums to help drive the rebound from recession. Yields on 10-year notes are close to their highest level since June, rising to 3.84 percent at 4:45 p.m. in New York.
Again, even a "limited amount" is too much. Had Bernanke actually paid attention in Economics 101, he would understand that this plan is doomed for failure. Supply and demand, dumbass, one entity can't be both. Or can they?
I imagine the success of their MBS plan, with the help of an unlimited housing bailout promise from their old friend Tim Geithner, has inspired the Fed to test just how far they can take this new role as sole purchaser and supplier of Treasurys. Ok, not sole, there's always "Foreign Central Banks" (LOL, still).
Have you guys checked out the line up for 2010's FOMC? It doesn't look promising for the dollar. I'll warn you bastards before December's FOMC minutes. You thought last year was bad, at least we had Lacker to put the smack down. It's dismal, you'll see. So expect a lot of boneheaded plans like this moving forward. At least Janet Yellen's ass is in the corner where she belongs.
LOL "exit strategy"
I already gave the Fed their exit strategy (because I'm such a helpful person) and it consisted of two very powerful words: pull out. They chose to ignore that and keep going. So now this is pretty much the best they have left which isn't saying much at all.
Oh and Happy New Year, kids. I'm happy to report every single kind of cop San Francisco has was out last night so I hid in my house after 9. I lost 1/4 of a PBR to one of them emerging from the Muni Metro but that's better than getting shot. Good times!