Get ready ...

[LWW]

QE1 created the latest bubble.

QE2 avoided the bubble's collapse, and has kept the bubble inflated. So far.

Now, to delay the inevitable collapse of the bubble, QE3 is already in the works:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Arlington, Va. (CNNMoney) -- If oil prices continue to climb, it could force the Federal Reserve to make a new round of asset purchases <span style='font-size: 11pt'><span style="color: #3366FF">Attention O-cultists, especially those who have denied that QE2 was purchasing assets with printed money. This is where you insist that the intent of QE2 was to buy assets with printed money</span></span>, according to Atlanta Fed President Dennis Lockhart <span style='font-size: 11pt'><span style="color: #3366FF">Attention O-cultists. That was a big wig Fed exec saying this, so when Beck or Limbaugh report it ... be sure to ignore their source.</span></span>.

Appearing at the National Association of Business Economics in Arlington, Va., Lockhart said that while he doesn't think additional purchases are currently warranted, more stimulus could be needed if oil prices continue to climb.

"If [the rising price of oil] plays through to the broad economy in a way that portends a recession, I would take a position we would respond with more accommodation," Lockhart said at the conference. <span style='font-size: 11pt'><span style="color: #3366FF">IOW ... it's a lock that they will try to pull it off.</span></span>

Though he doesn't think current oil prices around $106 a barrel are a problem, he said the evidence is clear that oil spikes can bring about a recession.

"I think at the $120 range ... it's a manageable level," he said. "Around $150 it becomes a much more serious concern."

The Fed announced plans to buy $600 billion in long-term Treasuries last November, a process known as quantitative easing, or QE2 because it is the second round of such purchases. Since then, economic growth has picked up, leading some to call for an early end to QE2. <span style='font-size: 11pt'><span style="color: #3366FF">Note to O-cultists. This is why the banks aren't lending. They print money ... give the money to the banksters ... and the banksters buy the treasuries and collect the interest. It's a guaranteed profit with no real investment from the banksters, and it artificially keeps treasury rates low. Oh ... don't forget to blame Bush while you praise dear leader.</span></span>

Lockhart, who is not currently a voting member of the Federal Reserve's policy making committee, declined to say whether he thought "QE3" could get past the current committee, which is seen as somewhat more hawkish on inflation.

Dallas Fed President Richard Fisher, who is a voting member of the rotating committee, showed strong opposition to the idea of QE3 in a speech to the Institute of International Bankers meeting Monday morning. In fact, Fisher said he would be open to an early end of QE2.

"I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it," Fisher wrote in prepared remarks.


But there remains a fair amount of disagreement among Fed members over whether the economy still needs help, or inflation is the bigger worry.

In Congressional testimony last week, Fed Chairman Ben Bernanke said he hadn't closed the door on the possibility of a new round of Treasuries purchases, and largely brushed off concerns about rising prices. <span style='font-size: 11pt'><span style="color: #3366FF">IOW ... he will try.</span></span>

Lockhart said while the Fed needs to keep an eye on inflation expectations, he doesn't think the labor market has recovered enough for higher wages, a core component of inflation, to take hold.

He said despite the strong February jobs report, "it is premature to declare a jobs recovery is firmly established." </div></div>


Isn't it amazing how the O-cult saw reversed opinion on all this even as dear leader pushed the pedal to the floor on bad Bush policy.

By the time this regime is finished with the USA, our economic landscape is likely to look like the final scene in a Godziller movie:
http://manhattaninfidel.com/__oneclick_uploads/2010/10/godzilla-toho-original-00.jpg

[Soflasnapper]

What bubbles are these you refer to?

The $300 or so billions, half the money that was authorized for TARP but all that was paid out, is all repaid now, except for AIG's approx. $40 B. I do not think that $40 B sustains much of a bubble in the size of this economy, especially given that much of the AIG subsidy went overseas to foreign banks.

[Qtec]

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Banks have repaid approximately 99 percent of their original bailout from the Troubled Asset Relief Program (TARP). According to the Treasury Department, taxpayers have recovered about $244 billion of the $245 billion in TARP funds that were doled out to banks. <u>The TARP program is ultimately expected to “provide a lifetime profit of nearly $20 billion to taxpayers.” </u></div></div>

Q

[LWW]

Whatever is on the spoon eh?

Using TARP money to buy treasuries is not repaying the TARP money.

Borrowing money for GM to repay the money borrowed by GM doesn't mean GM paid off the debt early.

Giving GM tax credits in the amount of the money borrowed doesn't mean the money is ever being paid back.

Yet all of these are a matter of faith for the O-cult.

Back to reality:

http://si.wsj.net/public/resources/images/OB-KS502_FedA_1_G_20101103232543.jpg

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The Federal Reserve, in a dramatic effort to rev up a "disappointingly slow" economic recovery, said it will buy $600 billion of U.S. government bonds over the next eight months to drive down interest rates and encourage more borrowing and growth.

Many outside the Fed, and some inside, see the move as a 'Hail Mary' pass by Fed Chairman Ben Bernanke. He embraced highly unconventional policies during the financial crisis to ward off a financial-system collapse. But a year and a half later, he confronts an economy hobbled by high unemployment, a gridlocked political system and the threat of a Japan-like period of deflation, or a debilitating fall in consumer prices.

The Federal Reserve Wednesday unveiled a controversial new plan to buy $600 Billion of Treasurys, hoping to spur growth in a disappointingly slow U.S. economy. David Wessel and Neal Lipschutz discuss the likelihood that the plan will work.

The Fed left open the possibility of doing more if growth and inflation don't perk up in the months ahead. The $75 billion a month in new purchases of Treasury debt come on top of $35 billion a month the Fed is expected to spend to replace mortgage bonds in its portfolio that are being retired.

The Dow Jones Industrial Average Wednesday continued a climb that began in August, when Mr. Bernanke signaled that a bond-buying program was possible. The index rose 26.41 points, or 0.24%, to a two-year high of 11215.13. Yields on 10-year notes, which have fallen from just under 3% in early August, finished the day at 2.62%. The value of the dollar has fallen in anticipation of a flood of new American currency hitting global financial markets.

These market reactions are seen inside the Fed as being stimulative to the economy. In addition to the impact of cheaper borrowing, higher stock prices could encourage households to spend more and businesses to invest more, and a weak dollar could make U.S. exports cheaper and thus easier to sell abroad.

"All of these things are part of what the Fed is trying to do, and I think it has been successful," said Laurence Kantor, head of research at Barclays Capital in New York.

The moves announced Wednesday were broadly in line with the expectations of economists, although some had expected total spending to be a bit less and to come more quickly.

There are immense unknowns and many risks.

Global Rates

In essence, the Fed now will print money to buy as much as $900 billion in U.S. government bonds through June—an amount roughly equal to the government's total projected borrowing needs over that period.

In normal times, a Fed spending spree on government bonds would be highly inflationary, because it would flood the economy with money and raise worries about too much government spending. The mere worry of too much inflation in financial markets could drive long-term interest rates higher and cause the Fed's program to backfire.

Prices in commodities markets have marched higher since late August. Crude-oil futures prices, for instance, have risen 15% since then, to $85 per barrel.

Journal CommunityDISCUSS
“I hope Home Depot is having a sale on wheelbarrows, because I'm going to need a new one to carry my money into the grocery store for a loaf of bread soon. ”
—Misty Lane
Michael Pence, a top Republican in the House of Representatives, said the Fed was taking an "incalculable risk."

Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, who described the move before the meeting as a "bargain with the devil," was the lone dissenter in a 10-1 vote of the Fed's policy committee. He said the risks of additional government bond purchases outweighed the benefits.

But Fed officials are betting that inflation is still being pushed strongly in the other direction because there is so much spare capacity in the economy—including an unemployment rate at 9.6%, a real-estate landscape littered with more than 14 million unoccupied homes, and manufacturers operating with 28% of their productive capacity going unused.

The latest economic data suggest the economy is expanding, but not at a very fast pace. Figures Wednesday from payroll firm Automatic Data Processing Inc. and consultancy Macroeconomic Advisers showed that companies added 43,000 private-sector jobs in October.

In a post-meeting statement, the Fed said it was acting to "promote a stronger pace of economic recovery" and to ensure that inflation, now running at around a 1% annual rate, moves toward the Fed's informal objective of 2%.

This is the Fed's second experiment with a big bond-buying program. Between January 2009 and March of this year, the central bank purchased roughly $1.7 trillion worth of government and mortgage bonds. That move also sparked worries about inflation, which so far hasn't materialized. The bond-buying program is known in some corners as quantitative easing.

"This approach eased financial conditions in the past and, so far, looks to be effective again," Mr. Bernanke said in an opinion piece scheduled to be published in Thursday's Washington Post.

By buying a lot of bonds and taking them off the market, the Fed expects to push up their prices and push down their yields. The Fed hopes that will result in lower interest rates for homeowners, consumers and businesses, which in turn will encourage more of them to borrow, spend and invest. The Fed figures it will also drive investors into stocks, corporate bonds and other riskier investments offering higher returns.

The Fed normally would push down short-term interest rates when the economy is weak. But it has already pushed those rates to near zero, leaving it to resort to unconventional measures.

The planned bond buying, by Fed calculations, will have an economic impact roughly equivalent to cutting short-term interest rates by three-quarters of a percentage point.

The Fed will be buying bonds with maturities of as long as 30 years, but will concentrate its purchases in the five-year to six-year range. Some bond-market participants were disappointed with that decision because they wanted the Fed to focus on buying longer-term bonds. But doing so could leave the Fed more exposed to losses if interest rates rise.

There are other risks.

Critics say a weaker dollar isn't in U.S. interests, and that a swift decline in the value of the currency could drive up U.S. interest rates. Fed officials have seen the dollar's drop to date as being orderly and supportive of growth.

Some critics also argue that by purchasing government bonds, the Fed is taking pressure off the White House and Congress to address long-term deficit problems, but Mr. Bernanke is trying to avoid such political calculations.

U.S. trading partners, particularly in the developing world, openly worry that the Fed's money pumping is creating inflation in their own economies and a risk of asset-price bubbles. Fed officials say a strong U.S. economy is in everyone's interest.

In recent weeks, China, India, Australia and others have pushed their own interest rates higher to tamp down inflation forces. Authorities in Brazil and Thailand have imposed taxes on capital flooding into their economies to prevent an asset bubble. And Japanese authorities have intervened in currency markets to prevent the yen from appreciating too much against the dollar.

There is an alternate risk that officials wrestled with in their latest two-day meeting, which concluded before lunch Wednesday: They might not be doing enough.

Economists at the research firm Macroeconomic Advisers LLC calculated that even if the Fed purchases $1.5 trillion worth of Treasury bonds—which some economists say remains a distinct possibility—it would only bring the unemployment rate down by 0.2 percentage points by the end of 2011.

"This instrument doesn't give them a lot of power, especially on the scale which they're prepared to use," said Laurence Meyer, of Macroeconomic Advisers, after the decision.

For the Fed, it was a middle ground that emerged after months of internal debate about the costs and benefits of restarting the program.</div></div>
OH DEAR! (http://online.wsj.com/article/SB10001424052748703506904575592471354774194.html?m od=WSJ_hp_LEADNewsCollection)


Skyrocketing food and oil prices ... a crashing dollar ... but if the regime says it ain't so, the O-cult will swear it ain't so.

[Soflasnapper]

You are confused if you think the Federal Reserve policy is in any way influenced by any president, or that supporters of Obama are automatically in favor of the Federal Reserve's private policy choices which don't involve O whatsoever.

Your large graphic is wonderful, but sadly quite out of date, running only so far as maybe November of last year. We're a whole quarter+ (4 months) past that time.

We'll see if the GOP for their part decides to fight the Fed, but my view is that they, like the Democrats, work for those private banking interests.

[LWW]

Sorry, Obama reannointed Bernanke ... and SecTreas is on board with QE2.

The left washing Obama's hands of all treachery while maintaining him to a fabulous intellectual giant at the same time is amusing to watch.

[Qtec]

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The left washing Obama's hands of all treachery while maintaining him to a fabulous intellectual giant at the same time is amusing to watch. </div></div>

I'm pretty sure YOU made some posts about how the progressives were displeased with what O was doing. If you read the leftwing blogs like I do then you would know Obama is taking a lot of heat, and quite rightly so.

ie, you are talking out of an orifice that is not your mouth.

Q

[Soflasnapper]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">Sorry, Obama reannointed Bernanke ... and SecTreas is on board with QE2.

The left washing Obama's hands of all treachery while maintaining him to a fabulous intellectual giant at the same time is amusing to watch. </div></div>

The administration might as well say they're on board with the Fed policy, since it is what it is and they cannot do anything about it. SecTreasury Geithner used to be... wait for it... the head of the NY Regional Fed. Urp!

[LWW]

Thanks for making my point.