quantitative easing Archives | Restoring Liberty

$2,001,093,000,000: Fed’s Ownership of U.S. Debt Breaks $2T for First Time

August 20, 2013/3 Comments/in Featured, News /by Terence P. Jeffrey

(CNSNews.com) – The Federal Reserve’s holdings of publicly traded U.S. Treasury securities—federal government debt—pushed above $2 trillion for the first time last week, hitting approximately $2,001,093,000,000 as of Aug. 14, according to the Fed’s latest weekly accounting.

The Fed’s accounting for the previous week showed that it had owned approximately $1,993,375,000,000 in U.S. Treasury securities as of Aug. 7.

Back on Dec. 31, 2008, before the Fed began its strategy of “Quantitative Easing,” the Fed owned only $475.9 billion in U.S. Treasury securities. Since then, the Fed’s holdings of U.S. government debt have more than quadrupled.

Launched in 2009, the Fed’s Quantitative Easing (QE) efforts have attempted to stimulate the economy.

“Under QE,” explains a February 2013 Congressional Research Service report, “the Fed attempts to lower long-term Treasury and MBS [mortgage-backed security] yields directly through purchases that drive down their yields, in the hope that lower Treasury and MBS yields will indirectly filter through to reductions in other private long-term yields. (Lower Treasury yields do not directly stimulate economic activity—they are only stimulative if other yields fall as a result.) This could occur because Treasury securities are considered a ‘benchmark’ against which other private securities are priced, so that other securities are automatically repriced when Treasuries are repriced (although the change is unlikely to be one-to-one).”

Gold Surge Bodes Ill for Economy

August 13, 2013/1 Comment/in Featured, News /by Jerome R. Corsi

The recent increase in gold prices suggest investors are increasingly worried the Federal Reserve may soon back off its current policy of quantitative easing in which it has bought billions of dollars of U.S. treasury debt and mortgage backed securities over the past few years.

In an article published Monday, Tyler Durden of ZeroHedge.com noted investors last week covered an enormous number of options contracts going short on gold futures prices, 23,518 futures contracts in total, suggesting a short-squeeze on gold is starting to solidify.

Short positions on gold futures contracts involve bets an investor makes that the price of gold will drop in the future. If the price of gold does not drop as anticipated, the investor owning a short contract must take a loss by purchasing gold at current prices to close out the contract on the expiration date.

When gold prices increase, investors owning gold futures short contracts risk losing money on the bad bet that the price of gold would have declined between the date the contract was purchased and the expiration date of the contract.

Durden noted the covering of gold shorts occurred last week at the fastest pace seen in the past 13 years.

Welcome to QE4!

December 12, 2012/1 Comment/in Featured, News /by Daniel Horowitz

photo credit: dctim1

The actions of the Federal Reserve over the past 4 years exemplify insanity more than anything else in politics. They continue implementing one monetary stimulus policy after another in an attempt to jumpstart the economy, even though they keep failing in that goal. We had QE1,2,3 and Operations Twist 1 and 2. Now the Fed’s Open Market Committee has announced a new monetary stimulus package that can only be described as QE4.

Evidently, the economy was recovering enough for Obama to win reelection, but not enough to end the market distorting, dollar-destroying stimulus from the unelected governors at the Fed. So not only will the Fed continue purchasing $40 billion in mortgage-backed securities per month, they will engage in another round of buying long-term treasuries:

“To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”

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