Federal reserve might stop Quantitative Easing.

[ZenOps]

There is a possibility that on Wed the FED will stop buying US government bonds with printed money.

What does it mean?

If they go ahead with it, there is the potential for immediate stock market disruption (thats a polite way of saying potential crash)

I can imagine that the weakness in the markets over the last weeks is hedging against the FED announcement, or not.

[broken_legs]

Originally posted by ZenOps
There is a possibility that on Wed the FED will stop buying US government bonds with printed money.

What does it mean?

If they go ahead with it, there is the potential for immediate stock market disruption (thats a polite way of saying potential crash)

I can imagine that the weakness in the markets over the last weeks is hedging against the FED announcement, or not.

I can't remember where exactly, but I saw a chart that showed this slow reduction in QE from teh FED was being almost exactly offset by an increase in QE from the EU Central Bank.

Will try to find the link. Toss a coin to see if it goes up or down from here. Nothing will surprise me now.

[max_boost]

Possibility? How high %? Time to inverse the market? Bet on down? Lol

[BigMass]

Originally posted by broken_legs


I can't remember where exactly, but I saw a chart that showed this slow reduction in QE from teh FED was being almost exactly offset by an increase in QE from the EU Central Bank.


http://www.washingtontimes.com/news/2014/jun/29/baffled-by-belgium-burst-of-us-bond-buying-raised-/?page=all

"Belgium" purchased 1/2 it's GDP in US treasuries. Back door buying by the Fed using proxies is common. QE will never end because our global economy is a full blown Ponzi on a scale that makes Bernie Madoff blush.

[Sugarphreak]

...

[ZenOps]

Nobody knows, but QE4 is also just as likely as an announcement if they decide to go that route.

[Cos]

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[revelations]

Originally posted by BigMass


http://www.washingtontimes.com/news/2014/jun/29/baffled-by-belgium-burst-of-us-bond-buying-raised-/?page=all

"Belgium" purchased 1/2 it's GDP in US treasuries. Back door buying by the Fed using proxies is common. QE will never end because our global economy is a full blown Ponzi on a scale that makes Bernie Madoff blush.

I had no idea of the magnitude of this problem (knew bits and pieces) until I watched a video by former Canadian minister of Defense Paul Hellyer.

While scary, I do believe a better system will eventually evolve to take its place (probably bitcoin-related).

[benyl]

Originally posted by Sugarphreak
First a speculative market crash, then higher interest rates

You mean lower interest rates.

[Sugarphreak]

...

[BigMass]

Originally posted by Sugarphreak

Less money being printed makes the existing money out there more valuable against assets... so to account for that, interest rates need to go up.

yes that is true. But what does that have to do with the world we live in today? QE is not stopping, interest rates will not go up and the Fed will never unwind its balance sheet.

[Sugarphreak]

...

[benyl]

mortgage rates I can see going up. the overnight rate.... negative territory.

If QE4 doesn't happen, I can see Nickle going sky high.

[BigMass]

Originally posted by Sugarphreak


Agreed, I've been worried about this for a few years now.... recession was over in the summer of 2009, why are we still doing QE 5 years later, lol!

I would imagine we will hit a breaking point, similar to how the banks did with the mortgage BS

the recession is over. For the few that are benefiting from the Fed's massive inflation with rising house prices and rising stock markets. Doesn't do shit for the average American that's been out of a job since 2009 and on foodstamps with about a %0 chance of ever getting back in the workforce. Or those that lost their decent paying full time job and are now working 3 shitty part time jobs with shitty schedules so they can bring in 1/2 of what they were making prior. Oh BTW the government considers that a net job gain. If you lose your full time job and have to pick up 3 part time jobs, that's a net gain of 2 new jobs to the economy. Awesome government math there.

[BigMass]

Originally posted by benyl
mortgage rates I can see going up. the overnight rate.... negative territory.

If QE4 doesn't happen, I can see Nickle going sky high.

mortgage rates won't go up don't worry. Housing is a massive part of the economy, not only to jobs and GDP but towards collecting property taxes etc. The government will implement every single policy it needs to keep the housing markets going. Low rates, easier lending standards, zero down payment, more CMHC etc. mortgage rates are a huge part of home affordability for the average broke Canadian so that has zero risk of ever increasing in the near future. Remember there is no "free market" in bonds and interest rates. Governments and central banks around the world set these rates through control of these markets. Why do you think every major developed nation around the world, no matter how strong their economy is, currently has low rates. It's collusion by central banks. There is no threat of rates ever rising again. Probably not in my lifetime. This isn't 1980 anymore, it's a totally different geopolitical and economic landscape.

[broken_legs]

Originally posted by BigMass


mortgage rates won't go up don't worry. Housing is a massive part of the economy, not only to jobs and GDP but towards collecting property taxes etc. The government will implement every single policy it needs to keep the housing markets going. Low rates, easier lending standards, zero down payment, more CMHC etc. mortgage rates are a huge part of home affordability for the average broke Canadian so that has zero risk of ever increasing in the near future. Remember there is no "free market" in bonds and interest rates. Governments and central banks around the world set these rates through control of these markets. Why do you think every major developed nation around the world, no matter how strong their economy is, currently has low rates. It's collusion by central banks. There is no threat of rates ever rising again. Probably not in my lifetime. This isn't 1980 anymore, it's a totally different geopolitical and economic landscape.

This is of course 100% true.... Until it isn't.

Fact is we don't know what they are going to do. The entire economy is being run by the Wizard of Oz, and only he knows which lever he's going to pull next.

[Cos]

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[ExtraSlow]

It's always fun to think about how much good that money could have done in the hands of consumers. Most people wouldn't have saved it, and it would be recycled around the economy multiple times.

2.4 trillion dollars buys a lot of big macs, yo.

[icky2unk]

And..... It's gone

[BigMass]

Originally posted by icky2unk
And..... It's gone

QE1 and QE2 were also "gone" so we'll see. But I do love that southpark scene heh

[Cos]

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[benyl]

US QE has nothing to do with Canadian Bonds... I am not sure what you are waiting for.

[ZenOps]

Silver dropped to under $17 US an ounce. Less money printed means less inflation in all asset classes.

It comes down a lot to whether the US intends to go with negative interest rates. The more you owe, the more money you start to make each year. Its as simple as that, if you owe $100 trillion dollars and have to pay someone 1%, its bad for you. If you owe $100 trillion dollars and you force people to pay you at a -1% interest rate, then the person with the most money owing actually makes the most money.

Effectively, the US/FED policy can destroy dollars by mandating a negative interest rate far faster than by burning actual dollar bills (Destruction of money is suprisingly easy in this manner)

Then they can keep things going for a while, until people start protesting and storming governments when they realize what is happening.

Its always important to keep in mind that a US dollar bill in itself is debt and not an asset until you buy something else with it. Holding onto debt, means that it can buy significantly less a year or a decade from now. Holding onto debt during negative interest rates? Might work to make money for a couple weeks to a couple years, noone knows for sure.

[ZenOps]

BTW: University econ grads might get burned in the upcoming years.

I've seen what they teach, and the vast majority of it is how to make money. Which in this environment is a bad thing.

The student that takes twice as much time to learn how an economic system destroys money is the one that is going to come out of this smelling like roses.

IMO.

[Feruk]

Originally posted by Cos
come on low interest rates, i have 30 days to lock my mortgage.
Good for those with an existing mortgage, bad for those looking to buy.