We are so screwed. I give up.

But once the masters of the universe have everything, what will they do for fun? Maybe fight each other to become the supreme commander of everything. I think that would be quite lonely in the end.

Okay, I’m going to go out on a limb and defend the Fed a little. First off, while weakening the dollar causes inflation here, it stimulates demand abroad because the value of the dollar outside the country deflates. Exports become cheaper. Additionally, the Fed has a very limited toolbox. Unlike Congress or the President, the Fed can’t create programs like a jobs program or extend unemployment or any of the other political tools that could be utilized to fix the economy. He’s stuck with the borrowing window and printing. While I don’t believe that QE2 will have the desired effect I at least give him points for TRYING to do something. It certainly appears that he’s the only one since Congress and the administration seem to be floating the trial balloons that this will be the new “normal’ and that we’ll have to wait for the cycle to self correct.

I’m glad I’d finished a glass of wine just before I watched that.

Yep. “What Will The Fed Buy Next?” (by Tyler Durden, Nov. 13, 2010)

Meanwhile …

“The CATO Institute Finds That The Fed Must Be Abolished” (by Tyler Durden, Nov 13. 2010)

As if the fact that the world economy has once again taken a turn for the worse (rising inflation in China, sinking everything in Europe, endless QE in the US) wasn’t enough, that pesky problem of robosigning and fraudclosure just refuses to go away. And even though the major banks are doing their best to remove any reference of this problem, which will eventually be the final nail in the coffin sealing the first truly global great depression, from the mainstream media, here is a sampling of some of the choicest admissions by robosigners, which will continue to serve as the basis for thousands of lawsuits (both RICO and otherwise) to come.

- excerpt from “The Nine Most “Inconvenient” RoboSigning Admissions BofA Would Love To Disappear” (by Tyler Durden, Nov. 13, 2010)

“Entire French Government Resigns Ahead Of Ministerial Reshuffle” (by Tyler Durden, Nov. 13, 2010)

Be afraid – I understand this stuff now.

So Goldman Sachs has a new “bubble” to expand, US Bonds. We should get ahead of the curve, and start selling the USA short right now. The Goldman Sachs techie guy says it so well. Fundamental research, does not matter. Good company, bad company, good country, bad country, it is just a game.

The market of today has become a “technical game”, Squeri says. Whoever has the best technology, wins.
“Macro [is] driving trends now, rather than fundamental research…Doesn’t matter if it’s a good company or not.”

So why are they buying treasury bonds from Goldman Sachs?

I think you are missing the central question: who is helped and who is hurt. The answer: banksters are helped. Retirees and small savers are crushed.

It’s too late, Bernanke says so here:

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action.

For more on the impact on retirees, see this post. I will address the impact on retirees with substantial assets in the near future. It’s bad too.

I’m giving The Goldman Sachs a gift. My home that’s underwater by $243,000. Moving into a house I have rented out for the last 23 years. I hope they enjoy it my present!

In case anyone is interested, here is the POMO schedule for the next month.

The announced amount of QE2 is pretty close to the projected deficit, but I’m sure that’s just a coincidence.

Destroying the dollar is good for exports, but bad for everything else. Specifically, commodities are heading up, quickly (the limit each day), and they are increasing margin requirements to try to slow the rate of increase. Oil is back to $85 per barrel, without any significant change in supply or demand, but somehow nobody seems to care this time around.

The biggest problem with QE/QE Lite/QE2 is that it is just blowing another bubble, this time in paper assets. It will collapse at some point, which is the defining characteristic of a bubble, and in the meantime does little or nothing to help the economy.

The theory is that Bernanke is trying to re-inflate the housing bubble (by keeping mortgage rates low) to salvage the MBS and CDOs thereupon, but it isn’t happening. Nobody has ever re-inflated a bubble. Bubbles are like forest fires, burning until all the fuel is gone. You have to wait for a new generation of suckers to grow up and let you burn all your money to run the same scam again.

What Ben is doing didn’t work before, and it’ll hurt small savers all over America. We should credit him for doing SOMETHING even though what he’s doing is destructive?

I love that BEARS explain the Fed. I had never thought of them as BEARS until reading Jane’s transcript. I thought they were, you know, people.

Actually, they are buying from Primary Dealers, of which GS is one.

The PDs buy bonds at auction, then re-sell them to the Fed (in as little as a week or two). Yes, they make a profit on the deal. It’s another way to shovel money into the big banks. It also looks a little more respectable than just printing money. Even though it’s just printing money.

I just watched this over at huffpo. Hilarious, in a sickening way. Seems folks really hated the big bankster bailout thingy, and politicians begged to never have to take a vote like that again, so they just do an end around the American people and political process and run straight to the fed. Kinda telling that they decided to give Golden Sacks a commission on this.

I’m having a hard time distinguishing between this QE Bears cartoon and this Li’l Cthulu cartoon.

Seems in both cases our souls make their tummies happy.

I’m on board. This is really, really bad.
I don’t need another cartoon to make me comprehend.
Thank you, Jane. For sharing the bottom line spelling it out.

Lets say Ben wants to buy $100 worth of T bills how much does Goldman make?

One bazillion dollars, tax free!

This is a giveaway to Goldman who started this sweatheart deal Bush?

The income is tax free too?

Call them up and ask. Their phone number is BR-549

Not specifically. I was just referring to the fact that most big businesses manage to pay no taxes.

I bet the Tea Baggers never bring this up. Maybe we can trick them call it an Obama giveaway it might be for all I know. Lets see if the Tea Baggers who one office will turn on their bank masters/s

In addition to the scheduled $600 billion, there is an additional $300 billion or so from existing bonds in the Fed’s portfolio maturing, which they will roll over into new bonds.

True

I think that letting the PDs skim some profit from the deal is less significant than the fact that they are doing QE at all.

I’m told that in theory the Treasury takes takes money out of circulation by borrowing it, i.e., selling bonds, and puts money back into circulation by paying off that debt, i.e., buy bonds back. Recently the Fed has dropped the interest rate that banks pay nearly to zero, whereupon banks have been borrowing borrowing that zero-interest money, buying bonds with it, and pocketing the interest. Now the Fed is offering to take those bonds off the bankers’ hands at a significant markup. Such a deal.

When the Fed sells more T bills the value of the dollar will go down sure we sell more exports however every other country wants to sell more exports too so expect them to lower the value of their money also.
As a global currency war of how low can your money go happens expect American consumers to see their buying power drop.
Americans are the world’s biggest consumer market if we don’t buy stuff who will America and the rest of the world get to buy their stuff?
I expect the Feds current plan if we don’t stop it to be bigger than the Bush bank collapse.

So sorry Loo Hoo. That’s awful.

Also as other countries lower the value of their money their consumers will buy less stuff hurting our exports and their own economies. This will create less demand for all goods world wide.

I’d seen this earlier this evening…and thought could you imagine just what impact this might have on people if this played on the news to explain to the masses and serfs just how absurd and outrageous The MOTU are behaving. I mean it is factually news worthy info here explained so even us mere simpletons can understand.

Oh and I love how they refer to them using “The” The Ben Ber-nank… (not bernan-ke) and The Goldman Sachs. The deflation.

Next they need to do one on the whole The Banksters fraudclosure robosigners crap, MERS racket, and/ or on Matt Taibbi’s rocket docket fraudclosure.

Glad to see this getting spread around. Needs to go viral. Hope there are more to come. Especially with The Holiday Season coming up. Great conversation starter.

Our current system of banking has made loans to businesses based on business plans that expected demand for goods at pre banking crash levels. The banks have not been calling in these now bad loans.
Why because we bailed out the banks. However that cash cannot keep the banks afloat forever.
Ben’s attempt to boost demand by lowering the Dollar’s value and not expecting other countries to lower the value of their money and not expecting Americans to lower their consumer spending as the value of the Dollar goes down is insane.

Ben is rearranging the deck chairs on the Titanic, he’s fiddling as Rome burns.

He’s doing the only thing he has left to do, since he can’t bear the thought of doing nothing. It didn’t work last time, and won’t work this time, but by crimney, he’s doing something.

Also, with the new Congress, you can forget about any fiscal stimulus. QE2 is the whole show for the next two years. And it won’t work.

Most businesses get tax credits instead of the tax deductions available to the rest of us. As a result, they not only avoid paying taxes they actually GET money from the Treasury.

He’s doing the only thing he has left to do,

He’s making things works he’s peeing gas on a bonfire. I agree he has to do something…wait panic this is a Panic reaction.
The Fed is in Panic mode…Great just what we don’t need.

But Teddy, bears ARE people. I know some lovely ones. ;-)

I love this video, it’s even better than the bears’ video on health care. Hence forth I think we should refer to the Fed Chair as “The Benbernank.”

he’s peeing gas on a bonfire

You’re just being inflammatory.

Doesn’t Ben need a helicopter for this, though?

How come neither BEAR mentions the helicopter?

You know, I don’t think this is a helicopter, which would distribute clouds of cash far and wide. I think this is a plutocrat-seeking smart-bomb of cash blasting directly into the PDs accounts.

Yes, virality for this benbernank is devoutly to be wished.

Thanks, Jane.

Europe is furiOUs

Nice :)

So is China.

We should try that Xtranormal text-to-video site ourselves; goodness knows there’s been enough emails exchanged about the horrors of the benbernank that could become videos.

With enough text-to-video, benbernank would become a household word, like bogeyman.

Blogging in the bathtub candle lite with yoga music in the background…risky business.

Here’s the best technical explanation I can find as to EXACTLY what the Fed is trying to accomplish:

http://www.nakedcapitalism.com/2010/11/we-speak-to-real-news-network-about-qe2.html

For those of you that want to cut to the answer – we’re bailing out the TBTF banks and Wall St AGAIN.

While meditating and doing yin yoga… better than Quantitative easing.

Bail Baby Bail

Lots of bond-market jargon … the site generally has some nice bits of information floating in a vast sea of teabaggery, however:

the link

there is a distinct possibility that due to the par-market difference, especially with many CUSIPs trading near record prices over par, the Fed may be implicitly letting PDs pocket the market-to-notional difference. The total, as shown below, could amount to over $40 billion. Furthermore, by avoiding the tight spread of on the run bonds, the Fed is effectively allowing PDs to pocket a huge bid/offer spread, which assuming a total size of ~$800 billion (low estimate) of all USTs bought over the (initial) life of QE2, aka QE2.5 and higher pre-extensions, amounts to $50 billion over the next 8 months.

I believe those two numbers are supposed to sum (thus the title of the article) for $90 billion, or about 11%.

god’s work.

Better than robbing Fort Knox this is the all-time greatest heist by the banksters!

And what did the William Dudley do before running the New York Fed?>

And who ran the New York Fed before Dudley?

Quantitative easing sounds like the kind of thing we used to use amyl nitrate for, back in the day. A really big reaming.

While QE clearly shovels some money at the big banks, the primary purposes seem to be:

* pretend to be relevant
* kill the dollar to encourage exports
* hold down long-term rates to try to stimulate housing
* stimulate inflation in order to avoid deflation
* inflate the stock market in nominal terms
* monetize the deficit. Specifically, to avoid a failed bond auction.
* to keep interest rates down in general, since the debt service for the US government would explode with as little as a few points higher rates.

I don’t have the links handy, but around half the US debt is now at sub-year duration (or maybe sub-2 year), paying nearly zero interest. We’ve rolled something like $6 trillion in debt so far this year. Any rise in short-term rates would be immediately felt, and cut a huge hole in the budget.

The Feds on drugs explains so much:)

That much short term debt why this makes me nervous.

So the Fed is stealth bailing out the banks $90 billion?

Right. Over the next eight months. With more undoubtedly to come.

I’m having a problem understanding how this hurts grandma. If she doesn’t want to sell her bonds she can hold them. No? If she does sell them, the chances are they are worth more since the interest rates will go down. NO?

Also, the bonds are not purchased from GS but on the open market. The idea as I understand is to put money out to lower interest rates and encourage investment, any kind of investment at lower interest rates. This is the Friedman school, I think. You know drop money from helicopters and hope it results in “green shoots” somewhere. Kenysians don’t believe this bull shit. Some think this will only ignite inflation which is bad for everyone.But here again Ben and some economists are more afraid of deflation and not inflation. Personally, I don’t know but Ben presumably gets paid to know this shit.

At the moment there is no other option to reinflate the economy. Got a better idea that will get past congress? I mean all they want to do is delate the economy by taking money out of it, by paying down the debt, like SS and medicare cuts.

Policy is to bail the banks and throw the hommeowners out. When all the foreclosures are sold the new housing bubble can start on steroids.

The Geithner.

I think you should do a diary:)

Maybe this “lesson” will be sufficient to push Congress into allowing the Fed to buy directly from Treasury or to let anybody front-run like G-S.

How is it G-S seems to get to front-run every big deal going? What gives them that special privilege?

Teddy Partridge is upstairs!
Pelosi Sorts Leadership Tussle

This is very confusing. There is a Chairman of the NYFed and a President. But as a practical matter they all are Goldman Sach fraudsters. They are also imbedded in all the important national security positions. That way they get the inside information on war profiteering. Friedman is especially tricky, running the Foreign Intelligence Secret CEO Warmonger Committee.

Stephen Friedman resigned as Chair of the Federal Reserve Bank of New York on Thursday, May 7, 2009 effective immediately[9]. Friedman, former CEO of Goldman Sachs and then-chairman of Stone Point Capital, LLC, Greenwich, Conn., was criticized for seemingly benefiting from his role as Chair of the New York Fed branch due to the US Government’s aid to Goldman Sachs in recent months. He had “remain[ed] on the board of Goldman even as he was supposedly regulating [Goldman]; in order to rectify the problem, he applied for, and got, a conflict of interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bankholding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer,” as one report put it

There will probably be spending on infrastructure and spending cuts to ease pressure on the private need for capital, so another QE probably won’t be needed.

Corporations don’t seem to think they need to be in panic mode, but as far as the American worker there is an on-going panic. Adding cash to the money supply devalues the rich a bit (not quite like a tax) and at this particular time it also nudges countries with whom we’re considering trade deals. It lets them all know we’ve got to put people to work, allow more free flow of commerce (Fair Trade) and try to balance our imports & exports more than in the past.

Our souls make The Goldman Sachs tummy happy too!

If only we could get The Bernank to stop reading the Necronomicon….

We have over capacity, high unemployment and the public is beyond broke with high levels of debt.

What is The Goldman Sachs going to do with the money?

The public’s broke and rather uncreditworthy… they won’t be borrowing.

Will domestic corporations borrow? Why would they? Thier existing plants are not running at capacity. And regardless, the public’s pockets are empty. Why make stuff for a public that cannot afford to buy it?

So, if the money goes anywhere… it will flow straight out of the country to buy up foreign assets or it will go into market speculation. Those are entirely extractive operations which hurt other nations without helping our own nation.

We need fiscal policy rather than monetary policy. That means that Congress needs to get up off it’s rear end and put the nation back to work. Otherwise there won’t be people earning wages and paying thier mortgages. Housing prices can’t stay up unless people are making money.

I should add that the old folks pensions have been rerouted into the housing market so… if housing continues to collapse, so will pensions.

“I’m having a problem understanding how this hurts grandma”

In most basic terms grandma’s purchasing power gets flushed down the toilet – grandma’s Social Security checks wont go as far as before. We are all getting pay cuts due to loss of purchasing power.

The problem for the small saver is that they don’t have bonds. They have bank CDs. Interest rates on the CDs has fallen below inflation, because the banks get free money from the Fed.

If Grandma has an actual bond. That isn’t a problem. Suppose she has a bond fund. Take a look at the 5 year total return on any random bond fund. Chances are it will show a very low number, below inflation at least, and quite possibly negative.

Finally, remember that Grandma might be quite inexperienced at dealings in financial markets, and suddenly she has to get into it with her small savings, or worse, with a couple of hundred thousand. Is that what we want?

oh god i loved the plumber line in that video

Always the threats from the banksters – we will crash the world!

Let the banks collapse. The people are living with poverty right now. The amount of fraudulent and corrupt “debt” is an unsustainable fantasy concocted by fraudsters that charged a percentage. One estimate I saw had the gigantic whirling ball of bullshit derivatives debt at $1200 trillion dollars in a world estimated to be worth $200 trillion. Do you want to be bailing that out forever?

Let them go broke, and if they “crash” the world, where are they going to hide? ~~~EDITED IN MODERATION~~~

~~~ModNote: Let’s not go there, please.~~~

As good as this is remember it is simply an idiosyncratic and simple story about complex mechanisms. The part that could be called outright misleading pertains to the way the Fed purchases the Treasury securities. That is not directly from the Treasury but from it’s Primary Dealers, or as the cartoon says The Goldman Sachs.

While the Fed has always purchased Treasury securities in this way, now that is the only way because the Treasury is simply not issuing enough longer term notes and bonds over the next 8 months to reach their target. There are many other practical reasons why purchasing directly from Treasury would be even more distorting for the financial system which can’t be briefly explained.

This is not to suggest I am in agreement about QE, I consider it a gigantic mistake and a giant gamble, or vice versa. The point is not to take this little story too seriously as an “explanation” that now “let’s me understand this stuff” as others have said above.

For 50 years Liberals have taken pride in not understanding monetary and financial matter. Taking a perverse sort of pride in not understanding matters of money. Wearing this ignorance as badge of honor and purity. The problem is that what we think of as the economy is highly correlated to the basic mechanisms of money and banking. Compounding the problem has been the fact that by ignoring these things at the citizen and political level the money power was seized by our opponents who shaped a system to their advantage and effected the greatest transfer of wealth in history, right under our noses.

I suppose it’s never too late if one takes the long view but for the foreseeable future it’s too late. Most have no real grasp of the economic shit storm that is coming. It’s 20 years too late to reign in the Fed now and make things right.

Everyone is looking for a magic pony. The one or two technical or policy moves which will go a long way towards making things right. That is impossible. There are gigantic systematic monetary imbalances globally which boil down to the fact that there is far too much debt and I do not mean just government debt. When there is too much debt then a lot of it is never paid back.

One should look at QE as an attempt to print money to pay off the old debt. A fools errand which pushes reckonings down the road, extend and pretend as some say. No amount of printing is going to make things right. Nothing is going to prevent most people from being less rich and far more economically insecure going forward. There is no magic pony.

Other than The Bernank, who said there was a magic pony?

I don’t know of any magic pony but there are reasonable ways of dealing with the present situation. Many of which were put to use in the 1930′s. Fiscal policy, progressive taxation, forclosure moratorium’s(Frazier-Lemke), productive government employment programs(CCC, WPA) and real bank reform(Glass Steagall).

Such measures would produce economic security and rising living standards over time. But these measures are anathema to the Wallstreet types so getting them put in place is like pulling teeth. More than anything, our problems are political.

As long as our fiscal and monetary policies are in the hands of people who have worked, currently work for and/or plan to work for Goldman Sachs, nothing will be fixed.

QE is good for exports in the short-term (until exchange rates adjust) but its real value comes from devaluing our dollar-denominated debt. People are worried about a government shutdown leading to debt default, but that scenario isn’t going to happen. We’ll default – in part, at least – but no one is going to SAY we’re defaulting.

For bond-holders (debt-holders), devaluing the dollar has the same effect as defaulting on a portion of our debt without having to use such an ugly term. For example, if the dollar is devalued to the point that its worth, its purchasing power, is only 90 cents, it would feel (almost) exactly the same to bond-holders as the scenario where the value of the dollar is maintained and the government announces that 10% of all bonds will never be paid.

Since China has about $850 billion of U.S. bonds that they complain they are unhappy with, maybe Ben Bernanke should simply ask China if they want to sell $600 billion to the Federal Reserve? (Cash them out.)

Then, they’ve got $250 billion left that they can easily sell off in the open market.

Maybe we buy the longer-term ones, and China can keep the shorter term ones to maturity. Then, they also would be cashed out.

Are they both bears, by the way?

Great Post!

The FED and the WHITE HOUSE are denial!

You can not run from the truth or the facts

the TOP 1% of the USA now controls 24% of USA wealth

the bottom 46% of has no wealth

the other 46% of the USA economy with wealth are baby boomers, who are not looking to buy another house, most are down sizing, and preparing for retirement or are already retired.

this little service economy is not working that well, when it comes to wealth creation for the masses

have been seeing this all week but hadn’t watched it – this thread is a fabulous testament to just how effective it communicates what in bloody hell is going on with QEII

and now I see it’s a technology available to all of us – time for some Cat Food Commission cartoony action ;D

Cash them out… in what? US imports are priced in dollars so China would simply be moving dollars from a higher interest “saving account” to a lower interest “checking account”.

TPC at Pragmatic Capitalism explains this all quite well..

Before we begin, it’s important that investors understand exactly what “cash” is. “Cash” is simply a very liquid liability of the U.S. government. You can call it “cash”, Federal Reserve notes, whatever. But it is a liability of the U.S. government. Just like a 13 week treasury bill. What is the major distinction between “cash” and bills? Just the duration and amount of interest the two pay. Think of one like a checking account and the other like a savings account…
http://pragcap.com/mechanics-qe-transaction

I don’t think this cartoon has a handle on why inflation is measured how it is, or why deflation is such a sticky, nasty trap. Paul Krugman has some interesting things to say on both these things -

Why standard measures of inflation don’t measure commodities like food and gas:
http://krugman.blogs.nytimes.com/2010/02/26/core-logic/

Why deflation is very, very bad:
http://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-bad/

(There are other economists posting similar views, if anybody wants additional links.)

I’m not an economist, but I don’t think the purpose of quantitative easing is so much to increase exports or devalue our debt (although from their reactions, that’s clearly what other countries think it’s about) as it is to try to pump money into the economy to keep us from getting into a deflationary trap like Japan did in the 90′s.

Because the Fed loaned Goldman Sachs money at zero percent interest so that Goldman Sachs could buy government debt (treasury bonds) and earn interest that way rather than making loans or investing in businesses.

It’s all a huge ripoff.

You are totally right that the cartoon misrepresents the risk of deflation. It gives many, many examples of inflation over the past year, but doesn’t point out that NOBODY claims there has been deflation over the past year. What Krugman and others claim is that we have had record LOW inflation (about 1%) and it is still dropping. If drastic measures are not done, we will reach deflation soon.

Of course the best thing to do would be to strengthen the economy with a strong jobs program. But short of congressional or presidential action, I agree with cwaltz @ 3 that the Fed is doing the only thing it can do, which is more than we can say about congress or the white house.

Yes the banks will make money of QE2, but they will make money if the Fed DOESN’T do QE2 as well. That’s what banks do, they make money.

Cash them out… in what? US imports are priced in dollars so China would simply be moving dollars from a higher interest “saving account” to a lower interest “checking account”.

The fed would use its $600 billion to buy the bonds held by China.

China would turn around and sell the dollars it received to others who wanted to hold dollars.

Because the currency markets are huge, China’s sale of dollars would not dramatically affect exchange rates. If there were some concern, the whole transaction could be structured over 6 months, at $3 or $4 billion a day.

I see what you are saying, but do see what I am saying?

Love Xtranormal Jane keep using it…

Not sure I see what you’re saying. Why would the Fed buy bonds the Chinese are holding when its purpose is supposedly to increase lending. What it will do is buy American bank assets: Treasuries and toxic assets. If it buys toxic assets at inflated book rates it will add to the bank bailout using another method. Will that increase loans? It’s doubtful, because loans won’t be made until the banks of get loan applications from business people who think there’s demand out there.
The impact of QE2 will mainly be to increase cash reserves in the big banks, and as Jane says to make things more profitable for Golden Sacks.

The banks need to be taken into resolution.

The Fed needs to be folded into Treasury.

And the treasury needs to stop issuing debt. That’s for nations that have constraints on the amount of currency they can create.

Jane, my compliments. This one was hilarious!