Of course, reading the fine-print indicates nothing new, & merely confirms what we said the same day QE3 was announced: “… the central bank will consider whether to expand its bond-buying at the end of the year to take account of Treasury purchases under its Operation Twist plan that finishes at year-end.” In other words, instead of ending Twist, which it can’t as this is an incremental $45 billion in long-end “flow” added to the market each month, the Fed will merely roll it into an unsterilized program, that will expand the Fed’s balance sheet not by $40 but by $85 billion per month. Of course, those who look at the Balance sheet in terms of ten year equivalents, know this all too well already, & know that there is no way that the Fed will halt Twist in just two months without replacing it with an unsterilized program, for the simple reason that the Fed’s holdings of sub 3 year debt are on the verge of running out.
There are now pressures on the Fed for immediate action on these two fronts, economists said.
“I think they are reasonably comfortable with the market reaction [to QE3] & the way the economy has turned out,” said Michael Hanson, an economist with BofA.
At the moment, the Fed is buying $45 billion of long-term Treasurys each month under its Operation Twist program, with the purchases offset by sales of shorter-term securities. Many economists think the Fed will decide to expand QE3 by that amount, & with Treasuries instead of MBS. But the announcement is not expected to come until its December meeting.
It is good to know that with each passing day the Fed is boxing itself ever more into a corner, as there is no way on this earth that Bernanke will be able to unwind a $5 trillion balance sheet, without destroying every last trace of the equity (& likely) other capital markets, unless there is a concurrent bout of hyperinflation. ]
Looking back to the end of Q/1, everyone expected the FED to deliver QE3 but were let down when they implemented Operation Twist instead as a layover so they could hold back on QE3 to throw it into the market as a re-election boost to the economy. Operation Twist is a creative little fiat currency two step that permits the FED to step in & fill the void where global purchases of Treasuries used to be. The US dollar system requires there to be a buyer of govt. debt in order to print waves of new money. They know printing more fiat paper money devalues that already in circulation but if other nations are willing to purchase govt. treasuries which are effected by dollar value knowing they will print more dollars based upon the purchase of the treasuries then this assures the FED that global participants will go along with the dollar devaluation scheme.
The problem is that China has become our pimp over the past two decades of outsourcing agreements that have moved over 2/3 of our manufacturing capacity over there & the deal made for being given our factories was that they would prop up the govt. debt 3 card montey game by themselves. Here comes the rub, when the Bush administration was talking about shuffling trillions of dollars to the banks right after the housing crash, China put their foot down & said “If you print this money to give away to the banksters you will destroy the value of the $3 TRILLION worth of US Treasuries we already have acquired & force us to lose money, we are not OK with this so DON’T PRINT MONEY TO PROP UP THE US ECONOMY & CREATE ANOTHER FIAT CURRENCY BUBBLE OR ELSE WE WILL STOP PLAYING ALONG WITH YOUR DOLLAR DEVALUATION CAMPAIGN”! As we all know, the FED didn’t listen to their lender & went ahead with printing apparently $43 TRILLION (according to a lawsuit regarding the bailout practices recently filed in New York federal courts) which has already done considerable damage to the dollars value in the global markets. As a result of being rebuffed China has made some radical moves to insulate themselves from the consequences of the FEDs unlimited money printing schemes & I implore you to do the same.
China has withdrawn themselves from propping up the US govt. anymore & as a result of this development the FED has been forced to adopt more radical solutions to fill the void left behind when China stopped playing along. This is why everyone is scratching their heads wondering why the fed is being so reckless with the trillions of dollars they have shelled out to European banks, US banks, corporations, & insurance companies to name of few all while not one single banker has been sent to jail or even arrested for creating this dangerous financial disaster that has threatened the stability of the world. Enter the benign sounding Operation Twist, which has been used to supplement the lack of govt. treasury purchases that are required in order to print new dollars that China has been shouldering all by themselves for decades now in exchange for our manufacturing might. Well the twist scheme concludes in December & they will be forced to create a new scheme to continue to prop up the auctions or the whole house of cards will come crumbling down. Therefor it has been my opinion, & now quite a large number of economists as well, that the FED will simply tell us they have to for all intents & purposes DOUBLE QE3 (which is already at a rate of infinity) in order to cover the additional burden of the treasuries too. As usual the American people will probably let this development go in one ear & out the other as they did when the private FED bankers announced they would print federal reserve notes into infinity in order to pump their banker buddies up with endless liquidity (QE3) at the expense of the American people & their life savings, purchasing power & retirement investments. If the people actually understood the consequences of this desperate move they would have been up in arms immediately, but of course they didn’t. So the financial crimes syndicate rolls on & every single month moving forward we will see the price of consumer goods continually increase as they deliver their monthly dose of dollar devaluation freebie handouts to the banksters. Then will come December & for Christmas the FED will give everyone the insanity that they have to double the QE3 INFINITY to be DOUBLE INFINITY QE3, Happy Holidays from the private central bank!
Establish your “Weak Dollar Insurance Policy” in physical gold & silver bullion now & begin to participate in the sound money debate that is raging all around you. Germany is demanding their gold home & I’m afraid this will trigger a wave of nationalism by other countries to make adjustments to better absorb the coming currency crisis. As usual most will wait until Jim Cramer is running around like a chicken with its head cut off telling you the sky is falling to get concerned, but I can assure you by the time Cramer warns you it will be long too late to do anything about it. Take charge of your life before you cant. Inflation when ignored & denied can morph into hyperinflation, recessions then can degrade into depressions & the current currency war being waged between the FED & China can fall into a trade war. Remember that it is far better strategy to PREPARE your portfolio than to attempt to REPAIR it once the damage has begun.