Skip to comments.Fed Cuts Monthly Asset Purchases To $55 Billion Maintaining Taper Pace, Market Awaits Yellen Remarks
Posted on 03/19/2014 11:14:09 AM PDT by John W
In her first Federal Open Market Committee meeting as head of the Federal Reserve Janet Yellen made good on her promise of continuity, again cutting back the central banks asset purchases.
On Wednesday, the FOMC announced a third $10 billion reduction in quantitative easing, reducing its monthly bond purchases to $55 billion and keeping with Fed watchers tapering exceptions. The Fed will cut monthly mortgage bond purchases to $25 billion from $30 billion. Treasury purchases will go from $35 billion to $30 billion.
(Excerpt) Read more at forbes.com ...
And the market promptly headed downward as the squirrels reacted to a new diet.
Gold down also.
I usually make up my own sayings as I go along, but that one is too funny not to steal:)
Each cutback in Fed spending raises the likelihood of increased interest rates and inflation.
And often, anything that makes a bond more attractive makes a stock less attractive.
But, but...the American Dollar is still worth 72.1 cents!
It’s all a big scam anyway. Eat, drink, and be merry.
“Each cutback in Fed spending raises the likelihood of increased interest rates and inflation.
And often, anything that makes a bond more attractive makes a stock less attractive.”
Sorry for the rambling comments. Ii seems that the cutback by the Fed would raise rates, but maybe reduce inflation.
10 years ago an examination of aging baby boomer demographics boded ill will for the stock market as retiring seniors were projected to reallocate from stocks to more secure bonds in their retirement. That trend would have would have pressured stocks, but it would have a lid on interest rates due to demand.
Everything changed with the crash and the Fed pumping trillions into artificially keeping market up, mortgage and treasury rates low, and thus making the stock market the only game of musical chairs in town. If Americans aren’t worried about the inevitable outcome here with large US debt, the potential of rising rates killing bond values, and a declining dollar they should be.
Have no fear....the bankers will always win. They are smart at getting rich but not in preventing bubbles. Do we Americans still have our gold at Ft Knox and with the Federal Reserve? They obviously don’t have Germany’s. America is infested with a lot more self serving corruption at the top than we ever imagined. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/1/16_Germanys_Entire_Gold_Hoard_At_The_Fed_May_Already_Be_Gone.html
You’re right about that aging population: they aren’t as interested in stocks and 20-30 year investment plans. I know I’m not. I have a doc friend who looked at investment fees on his 401(k) and decided it was a waste of his money.
But, demographics does have its impact. With so many babies aborted over the last 40 years, our population is barely at replacement and that’s probably because of immigrant (illegal and otherwise) fertility.
Some young homebuyers just don’t want to buy used houses in old neighborhoods. That causes new houses to get built. New houses means downward pressure on old house prices, given flatlining demographics. (Probably one reason they want to legalize illegals and let more of them in.)
Tend to agree. Yellen gets asked a question about why the US economy is taking so long to recover and gives a long rambling answering covering all sorts of factors, but never mentions Obamacare or the weight of the Federal regulatory state, for instance.
“But, but...the American Dollar is still worth 72.1 cents!”
True, true, provided your base period for comparison is one year ago;>)
For Freepers who are just now beginning their journey into enlightenment, let me explain about these asset purchases. Sounds great, huh? Who could be opposed to our Federal Reserve purchasing some more assets? They’re buying bonds, which are supposed to be conservative investments. So maybe they’re building up our nation’s financial strength somehow.
No. Their lips are moving. As always, that means they’re lying. Here’s how this shell game works.
When a government has to start printing money to pay its bills, the end is near. Soon such money becomes worthless, so governments will not even think of doing that unless it is a last resort to buy a little time before everything collapses. If you did have to do that, you might try to disguise it, so that it didn’t look to the casual observer like you were printing money to pay your bills. It would buy a little more time before people caught on and began acting in the disruptive ways that people do during currency destruction.
When the US government was semi-solvent, we just borrowed more and more money by selling bonds. But as it became increasingly clear that we could never repay our debt, fewer and fewer institutions and governments were willing to buy our bonds. It was more and more clear that we would have to default. We begin to offer bond and T-bill offerings that were undersubscribed, that is, people were saying “No, thanks” and leaving them unbought.
So the Federal Reserve Bank began buying the US bonds because no one else would. There were some bond auctions where 90%+ of the debt was “purchased” by the Federal Reserve Bank. The jig was up. Or it would be as soon as the press accurately informed the public about what was going on.
HAHAHAHA!! Sometimes I crack myself up.
There is so little risk of that happening that they doubled down. The Fed buys the debt for 0.1% - 3%, as if it were not junk debt, but blue-chip debt. This prevents the inflationary spiraling interest rates that the free market would like to assign to our debt. Mmm-mmm, fresh, crunchy new Federal Reserve Notes, better known as dollars. And they’ll be none the wiser, Ollie.
Just thought you should know something about those shiny new assets the Fed is purchasing.
They’re not going to cut anything. All lies....
Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.
I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare. It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules. These existing revenue streams must remain in place in perpetuity to handle the funded entitlement liabilities. Reduce or eliminate this income and the unfunded liability grows. Increase benefits and the liability grows as well.
It's been growing substantially worse since 2008. I've seen estimates of debt and unfunded liabilities of around $150 Trillion. There's no way to tell how large the global derivative market is, but just one company manages over a 1/4 quadrillion in commitments. There's not enough global value to cover anything close to those commitments.