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Friday, June 12, 2009


fed quantitative easing to end

via clusterstock -- the journal is reporting that the federal reserve hopes to be finished with quantitative easing. so much the better -- it's doubtful that adding to a titanic pile of excess reserves accomplishes anything except setting the fed up as the buyer of last resort -- with potentially disastrous consequences. they've certainly been crowned by the bond market of late.

what remains to be seen, however, is whether much-needed domestic purchasers of treasury debt emerge from the banks or the capital markets to soak up the waves and waves of supply emerging from the treasury that cannot be taken up by the international community seeking to reinvest their declining but still considerable capital account surpluses -- and if they don't readily, what kind of concessions treasury will have to make to win the international competition for funding. or will treasury be compelled to reduce its schedule? we may not have heard the last of QE quite yet, as the united states could be finding that -- while it has no visible problem in paying its debt at this time -- its funding requirements may nevertheless be large in relation to the global pool of capital readily available to finance it.

the government's room to maneuver may indeed be getting quite smaller than we think.

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the content of the story in the WSJ as I see it: We won´t buy another Trillion of T-Bonds and mortages, at least not now. (And even if we would, we will not announce it in late June.)
This is expectation management in the typical nebulous form.
"Fed quantitative easing to end - someday" would be a more appropriate headline.

Do you disagree ?

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it could well be, h. i think the fed's changing perceptions of exigencies and efficacy will dominate.

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If this was supposed to be bad news for Treasuries,
then bonds and notes digested it very well (so far).

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Unless the stock market crashes and the herd hop into treasuries I don't believe we will see QE ending anytime soon.

We are on CBO target for 1.8 trillion dollar deficits. With tax revenues dropping (their bulldozing cities now) and with another stimulus likely and health care, 1.8 trillion is going to look like a kids allowance soon.

BRIC is meeting in Russia in July, they are already inter trading with their currencies are buying less dollars. I'm sure the focus will be on a BRIC basket of currencies.

What they say and what they do aren't always one in the same.

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PS Just my 2 cents

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