FED To Spend $40B a Month on Bond Purchases

Ok, so the FED has spent $2T in bonds and securities since 2008 in an attempt to stimulate the economy, and we see how that has turned out. So their new idea.... Let's spend $40B a month more and see if that works....

You know I believe it was Einstein who said that the definition of insanity was to continue to do the same things over and over, and expect different results. That quote just kind of slapped me in the face when I read this.

Link to Article

Its no different than the people believing the next political leader will change the world. We fall for it every time.

Scientific Divinity

Quoted from the article:

The Fed said will spend $40 billion a month to buy mortgage-backed securities for as long as it deems necessary. It extended a plan to keep short-term rates at record lows through mid-2015. And it said it's ready to take other unconventional steps to boost the economy even after growth has begun to accelerate.

Wasn't there already a mortgage bubble that burst in 2008? How do they think homes are going to sell if most people can't afford them? I forsee a crash of mortgage-backed securities coming in the future.

The most hilarious thing about QE programs is they tend to RAISE interest rates! exactly the opposite of what they intend to do, because money flows into stocks and metals and out of bonds.

Now would probably be a good time to start stacking some metals... Goodbye US dollar.

In the past, when QE programs were implemented ostensibly to lower interest rates to spur financing activity - the opposite occurred as interest rates (as measured by the 10-yr yield)rose. This was due to the selling of bonds, which pushed prices lower and yields up, as money rotated into the equity markets reminiscent of the land grab during the 1890's gold rush.

www.businessinsider.com... irc

The Fed is a private organization right? ,.,.,. Why would we trust them to do things with their money and business to help the american economy? are they not making some kind of profit on these bond purchases? if not their business plan is throw money away?

reply to post by Majiq1


I though it was $40bn a month of mortgage backed securities purchases as well as unlimited future intervention?

Originally posted by InFriNiTee
Wasn't there already a mortgage bubble that burst in 2008? How do they think homes are going to sell if most people can't afford them? I forsee a crash of mortgage-backed securities coming in the future.

That is why the financial institutions own a massive 'shadow inventory' of homes that they don't want to put on the market. Because if they were on the market prices would go crashing further. This isn't even counting people living in homes and not paying their mortgages who they choose not to foreclose upon yet, because if they did foreclose the houses could end up on the market

Originally posted by Drew99GT
The most hilarious thing about QE programs is they tend to RAISE interest rates! exactly the opposite of what they intend to do, because money flows into stocks and metals and out of bonds.

Now would probably be a good time to start stacking some metals... Goodbye US dollar.

Good point, and that is what it seems happened as the announcement was made.

The dollar dropped against major currencies, and the price of gold shot up about $16 an ounce, roughly 1 percent, to $1,750.

Originally posted by Mkoll
reply to post by Majiq1

 

I though it was $40bn a month of mortgage backed securities purchases as well as unlimited future intervention?

That is how I read it as well.

"If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability," the Fed said in a statement released after the meeting.

Well, don't worry, it is only paper, well special paper from Massachusetts.

You won't even notice, at least until you go to buy something. Then you find out your paper isn't worth what it use to. And the things you buy seem to cost more.

Might want to invest in a wheel barrow now while they are still reasonable, cause sooner or later and probably sooner, you'll need one to carry your paper to the market to buy a loaf of bread.