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Thread: Goldman Sachs - 'The Fed Needs to Print $4 Trillion in Mew Money'

  1. #1

    Default Goldman Sachs - 'The Fed Needs to Print $4 Trillion in Mew Money'

    Next week should reveal the next hair raising, eye popping voodoo monetary policy measures of the Federal Reserve (deliberately postponed the October FOMC to after the mid term elections, thats how independent they are politically these days)

    The first round of Quantitative Easing was $1.25 Trillion and it achieved....

    A lot of that money came slushing back round to the Feds again, as people simply cannot afford to borrow anymore. So they decided to monetise the treasury debt by buying up their bills, notes and bonds and buy up some equities through POMO to keep the Dow up above 10,000 (or indeed 4,000 where the historic chart suggests it should be at) with the sizeable doggie bag leftover from the insolvent institutes who are trying to make money out of the spread between what they take off the Fed and what they deposit back to them at. (the Feds unexpectedly increased the deposit rate 6 months ago)

    Confused? No worries, so is the Federal Chairman Bernanke evidently.

    With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better. One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...
    Goldman: The Fed Needs To Print $4 Trillion In New Money | zero hedge
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

  2. #2
    Politics.ie Member Dan_Murphy's Avatar
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    Just four? Best make it five for good measure!

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    Politics.ie Member Sync's Avatar
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    Remember in Leaving Cert economics when one of the duller kids would inevitably ask "Why can't we just print more money?" Guess we know where they ended up.
    I'm living in America, and in America, you're on your own. America's not a country. It's just a business. Now f***ing pay me.

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    Politics.ie Member
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    Quote Originally Posted by Sync View Post
    Remember in Leaving Cert economics when one of the duller kids would inevitably ask "Why can't we just print more money?" Guess we know where they ended up.
    A very similar memory popped into my own head, strangely enough.

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    Politics.ie Member
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    The beauty of a house of cards is you don't need to worry about any foundations....

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    Politics.ie Member rhonda15's Avatar
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    [ame=http://www.youtube.com/watch?v=NCyCrl8mMbo]YouTube - Currency Wars, The Point of No Return[/ame]

    [ame=http://www.youtube.com/watch?v=QMwDynuruN4]YouTube - 1. Cash Is Trash. Why Gold & Silver? - Free Investing Movie With Mike Maloney[/ame]

    Protect yourself while you still can!
    "The individual is handicapped by coming face to face with a conspiracy so monstrous he cannot believe it exists.'' ~ J. Edgar Hoover http://tiny.cc/b2jo9

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    Politics.ie Member kerdasi amaq's Avatar
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    He's wrong to say that they are repeating the same stupid mistakes of the past.

    What they are doing is quite intentional.
    We have got as much as we are going to get out of Europe; it is, now, time to leave!
    EUROPA CONVENTUS DELENDA EST!...Whistle out the marching tune.....27

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    Politics.ie Member ne0ica's Avatar
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    Quote Originally Posted by Sync View Post
    Remember in Leaving Cert economics when one of the duller kids would inevitably ask "Why can't we just print more money?" Guess we know where they ended up.
    Funny thing you said that. A kid asked that very question in my Economics class and is now a SIPTU rep in the silly service.

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    Politics.ie Member rhonda15's Avatar
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    [ame=http://www.youtube.com/watch?v=ZAgjTo_awjA]YouTube - Yet another crash[/ame]

    Again we are in the midst of a financial crash, which goes unnoticed by the public.
    "The individual is handicapped by coming face to face with a conspiracy so monstrous he cannot believe it exists.'' ~ J. Edgar Hoover http://tiny.cc/b2jo9

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    Im off to scan and print my own Euro`s.

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