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QE-shmooey

An early release of the Fed minutes caught me by surprise this morning. Not the "leak" in and of itself (DaRAHma!) but what the minutes revealed.  While Bernanke suggested tapping the brake pedal  on QE appears to be in order, the minutes tell us Fed members are not unified in this.  

Of everything I've read, Barry Habib offers the most intriguing take thus far.   Below is exerpted from this morning's Daily Update at www.MBSHighway.com.  

Within the Minutes, Fed members raised concerns that the jobless rate was elevated and that they are not confident of sustained improvement.  Remember, these Minutes were originally taken from the Fed Meeting prior to the most recent dismal Jobs Report.  Score one for keeping QE around longer.  On the other hand, there were several members who appeared to be in favor of the concept of a mid-year tapering down of QE purchases.  It looks as if the Fed is divided on when QE should begin to be tapered.

And speaking of the Fed and QE 3, supposedly QE 3 is defined by $85 billion in monthly Bond purchases.  This is supposed to be $45 billion of longer dated Treasuries and $40 billion of Mortgage Backed Securities (MBS) each month.   But swept under the rug is the fact that the Fed can reinvest principal – meaning that any MBS holdings that have been paid off, like individuals who are refinancing or principal payments, can be reinvested in buying MBS.  I think most would find it surprising that this amount actually exceeds the amount of buying they are supposed to be doing.  For example, last month, the Fed purchased their normal $40 billion in MBS plus an additional $45 billion.  This totals $85 billion in Mortgage Bond purchases.  So, when the Fed eventually gets around to using this tapering mechanism, we will need to listen to see if it includes reinvestment, because this figure can be very significant.  

Interest Rates, Thin Air, Ignorance and Treason

"In 1980 the national debt was only 800 billion but interest rates were at 20%.  Now.... the debt is nearly 16 trillion -20 times what it was in 1980! And rates?  Well, they're at zero."   -Mike Norman, John Thomas Financial Chief Economist
                         




Clearly, deficits don't matter when you're the score keeper.  Modern money is tax driven.  Without taxation modern money has no value.  The U.S. dollar is modern money and it comes from "thin air".  So what happens to modern money when we pay Federal taxes?  It goes back where it came from - literally!  Dollars are spent into existence by decree of Congress.  The Federal government's liability is our asset and vice versa. Remember the Clinton surplus?




Every minute of every day the arbitrary number on the U.S. Debt clock is equal to dollars saved here and around the world, to the penny.  So, what's so unsustainable about consumers wanting to save dollars? Get a grip, people.  Stop listening to FOX, and CNBC and CNN and ABC and other mainstream sources because it makes you dumb!  Willful ignorance on this topic is an act of treason.