Archive for the Monetary Policy Category

Living In A QE World | The Big Picture

Posted in Debt Collapse, Federal Reserve, Fiat Money, Gold, Inflation, Monetary Policy on February 28, 2012 by JT

All Central Bank Balance Sheets Are Exploding Higher, Or Engaged In QE

The degree to which central banks around the world are printing money is unprecedented.

The first eight charts below show the balance sheets of the largest central banks in the world. They are the European Central Bank (ECB), the Federal Reserve (Fed), the Bank of Japan (BoJ), the Bank of England (BoE), the Bundesbank (Germany), the Banque de France, the People’s Bank of China (PBoC) and the Swiss National Bank (SNB). Noted on the charts are significant events or growth rates.

Shown is the size of each respective balance sheet in its local currency. Note that all are exploding higher as every chart goes from the lower left to the upper right. Most are still making new all-time highs. If the basic definition of quantitative easing (QE) is a significant increase in a central bank’s balance sheet via increasing banking reserves, then all eight of these central banks are engaged in QE.

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via Living In A QE World | The Big Picture.

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The Federal Reserve’s Explicit Goal: Devalue The Dollar 33%

Posted in Dollar, Federal Reserve, Inflation, Monetary Policy on February 12, 2012 by JT

This is very troublesome for those planning to live on a fixed income long term.  This type of planned devaluation is a structured default on government obligations like social security payments.  It is also a blatant  transfer of wealth(ie tax) from the savings and wages of the people  to the Federal Reserve and the government.  What is worse, is the the planned 2% rate of inflation is based on Core Inflation, which omits the impact of food and energy, where most inflation frequently occurs.  This type of systemic criminal behavior on the part of the Federal Reserve is another reason to own gold, silver and other commodities as a way to opt out of this insidious transfer of wealth and it’s destructive impact on the middle class. 

JT

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.

An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.

But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.

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via The Federal Reserve’s Explicit Goal: Devalue The Dollar 33% – Forbes.

Living In A QE World

Posted in Monetary Policy on January 27, 2012 by JT

All Central Bank Balance Sheets Are Exploding Higher, Or Engaged In QE

The degree to which central banks around the world are printing money is unprecedented.

The first eight charts below show the balance sheets of the largest central banks in the world. They are the European Central Bank (ECB), the Federal Reserve (Fed), the Bank of Japan (BoJ), the Bank of England (BoE), the Bundesbank (Germany), the Banque de France, the People’s Bank of China (PBoC) and the Swiss National Bank (SNB). Noted on the charts are significant events or growth rates.

Shown is the size of each respective balance sheet in its local currency. Note that all are exploding higher as every chart goes from the lower left to the upper right. Most are still making new all-time highs. If the basic definition of quantitative easing (QE) is a significant increase in a central bank’s balance sheet via increasing banking reserves, then all eight of these central banks are engaged in QE.

 

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via Living In A QE World | The Big Picture.

Fed pledges low rates till kingdom come! What it means …

Posted in Central Banking, Debt Collapse, Economy, Federal Reserve, Monetary Policy on January 27, 2012 by JT

Last week, I discussed how the European Central Bank has lost its marbles, launching its own version of quantitative easing. I dubbed it “QE-E.”

I also said that QE accomplishes almost nothing for the “real” economy, even if it juices asset markets. And sure enough, we got more proof of that this week (details to follow!).

Well, this week it was the Federal Reserve’s turn at the podium and what happened? Policymakers didn’t launch an official QE3 program. But they did promise to keep short-term interest rates low through late 2014 … up from a previous pledge of 2013.

Not only that, the Fed also said it would continue with its “Operation Twist” policy of selling shorter-term Treasuries and buying longer-term ones. The goal? Hold down long-term interest rates.

Noted bond fund manager Bill Gross of Pimco dubbed it “QE2.5.” All I could do was shake my head!

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via Fed pledges low rates till kingdom come! What it means … — Money and Markets.

Fed To Markets: Buy Gold And Silver

Posted in Federal Reserve, Gold, Monetary Policy, Silver on January 26, 2012 by JT

The Fed just spoke. Here’s a slightly edited transcript:

Blah blah blah … the economy has been expanding moderately … blah blah blah boilerplate inanity blatant lie … the Committee seeks to foster maximum employment and price stability ….

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

This of course comes as no surprise to anyone. But seeing it in print had exactly the impact you’d expect. Stocks erased their early losses, the dollar tanked, and precious metals soared. With good reason. It is now the stated policy of the US government to have negative real interest rates for years to come (eons in trader-time).

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via Fed To Markets: Buy Gold And Silver — DollarCollapse.com.

Bernanke lights a fire under gold and silver prices

Posted in Gold, Monetary Policy, Silver on January 26, 2012 by JT

“Party on!” was Federal Reserve Chairman Ben Bernanke’s message to Wall Street yesterday, as he announced that the Fed will be keeping interest rates at “exceptionally low” levels until late 2014, owing to concerns about stubbornly-high unemployment and the sustainability of the current statistical recovery. Bernanke also confirmed that for the first time in the Fed’s 99-year history, the institution will explicitly target a 2% inflation rate, as measured on the Personal Consumption Index (PCI). Other central banks have long had explicit inflation targets, but not the Fed.

Unsurprisingly given their enthusiasm for easy money, the market response to this move was euphoric. The Dow gained 0.64% to settle at 12756.96, while the Nasdaq tacked on 1.14% to settle at 2818.31. Asian and European exchanges have also reported gains this morning. Commodities such as copper and crude oil are up, while precious metals – ever sensitive to signs of more monetary easing from the Fed – notched impressive gains.

The gold price blew through overhead resistance around $1,680 with ease, and is now trading back above $1,700 per troy ounce. Silver broke through the $33 mark easily, which could be technically significant given that the price has been encountering stubborn selling around $32.50-$33 since last autumn. If silver can break through $35, and if we see signs that hedge funds are at last beginning to grasp that both the Fed and the European Central Bank are committed to more-or-less perpetual money printing – whatever euphemisms they may use to disguise this fact – silver has a real chance of starting the kind of trending move higher that we saw in late 2010/early 2011.

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via Bernanke lights a fire under gold and silver prices.

Fed to Maintain Rates Near Zero Through Late 2014

Posted in Central Banking, Debt Collapse, Federal Reserve, Monetary Policy on January 26, 2012 by JT

WASHINGTON — The Federal Reserve, declaring that the economy would need help for years to come, said Wednesday it would extend by 18 months the period that it plans to hold down interest rates in an effort to spur growth.

The Fed said that it now planned to keep short-term interest rates near zero until late 2014, continuing the transformation of a policy that began as shock therapy in the winter of 2008 into a six-year campaign to increase spending by rewarding borrowers and punishing savers.

The economy expanded “moderately” in recent weeks, the Fed said in a statement released after a two-day meeting of its policy-making committee, but jobs were still scarce, the housing sector remained deeply depressed and Europe’s flirtation with crisis could undermine the nascent domestic recovery.

The Fed forecast growth of up to 2.7 percent this year, up to 3.2 percent next year and up to 4 percent in 2014, but at the end of that period, the central bank projected that the recovery would still be incomplete. Workers would still be looking for jobs, and businesses would still be looking for customers.

“What did we learn today? Things are bad, and they’re not improving at the rate that they want them to improve,” said Kevin Logan, chief United States economist at HSBC. “That’s what they concluded — ‘We’ve eased policy a lot, but we haven’t eased it enough.’ ”

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via Fed to Maintain Rates Near Zero Through Late 2014 – NYTimes.com.

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