Wednesday, March 18, 2009

Fed To Buy Treasuries It Prints To Fund US Deficit

Forget the circularity of CDS shorting... this one should make your head explode... This has long been perceived as the FED's very last recourse. Maybe one should really start buying stocks ahead of the uber-hyperinflation that will imminently ensue. We recommend wheelbarrow stocks.This is textbook back against the wall. But at least the stock market takes another crutch up.

The Euro response is quite indicative. Will post more once the Jim Morrisonesque haze passes.

Print, print, print... God help us.

Euro, Gold and 10 Year TSY charts below... Enjoy...




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21 comments:

UrbanDigs said...

gold baby!!!

Anonymous said...

the Fed is truly "All-in" I cant imagine they introducing anything new past this. All thats left is to expand current programs indefinitely.

Max Leverage said...

Other countries can follow suit, and probably will.

One angry phone call from China could get this program cancelled.

A flight into the real (crack-up boom) might savage most equities.

"God help us"

Amen.

Cathryn Mataga said...

Or for more exciting results --maybe other countries won't? Wasn't this what the G20 bruhaha was all about? After the dust settles, well, I hear of this 'bondbubble' thing from some bloggers.

Anonymous said...

That's "wheelbarrow". The barrel is what you'll be wearing, a la the 1930s.

Tyler Durden said...

proud product of a 3rd grade spelling edumacation level

jmk said...

so no japan-style period of deflation then?

Anonymous said...

End of the World by REM would have been appropriate as well.

After the next few years, we will all be wishing for 1981 again..........

UrbanDigs said...

edumacation...love it

getyourselfconnected said...

Tyler,
You are not alone with spell check issues, I was able to use Snagit program to grab a typo on a yahoo Finance headline on Monday the 16th at 3:15pm EST. Pretty funny slip up:
"Obama: AIG can't LUSTIFY 'outrage' of bonuses"

see it here:
http://economicdisconnect.blogspot.com/2009/03/full-court-financial-press.html

Advant Guard said...

ECB is odd man out. SNB printing money. BOE printing money. Even BOJ printing money (I was beginning to think they'd lost the keys.) Last but not least, Fed buys Treasuries.

The Germans will stand proud as their economy sinks under the weight of their overvalued currency.

Rufus Willy said...

Whats best inflation trade besides gold, Tips and most obvious?

john cocktosin said...

Those are as good as money sir, those are IOU's.

Cathryn Mataga said...

"ECB is odd man out."

Yeah, though won't dollar investments want to move to the stronger currency? There's a lot of dollars out there, which makes this move for the USA a different situation than Japan or the UK.

Can we really blame the Fed? Wasn't this inevitable after the stimulus bill and budget.

gaius marius said...

i'll just stupidly wager that this does nothing.

the fed will inflate its balance sheet by adding t-bonds to the asset side and currency in circulation to the liability side.

the treasury will take the fed's dollars and spend them, which will fill some but not nearly enough of the output gap. the spent cash will quickly find its way to the banks either as loan repayments or deposits. banks will thereby deleverage and/or put deposits on reserve at the fed because there's barely a decent credit out there. so the fed will see reserve balances balloon yet further, enabling it to go out and fund some more alphabet soup or buy some more treasuries.

ergo -- big big fed -- deleveraging banks -- massive excess reserves -- continuing deflation.

thoughts?

Anonymous said...

If you really think inflation rips higher, why not go long TBT ? (2x inverse of long bond)

Max Leverage said...

I think the best bet is against wage inflation, even if we get asset price inflation. So, short a bunch of companies when your TA tells you to:

V, MA (consumer credit)
GPN (consumer payment processing)
restaurants (price relief is over, customers are broke)

You get the idea.

Anonymous said...

"If you really think inflation rips higher, why not go long TBT ? (2x inverse of long bond)"




Proof positive that there are complete idiots trading ETF's.

How long are you going to hold your TBT Long position? Idiot. Are you going to buy and hold?

Yossarian said...

TD, can you explain how a similar exercise in quantitative easing failed to incite another inflationary asset bubble in 1990's Japan? Logically it makes sense that a central bank should easily be successful if their goal is to create Monopoly Money to clean up the balance sheets of profligate banks and individuals and lend to new profiligate individuals. If, like me, you think that the credit mechanism creates monetary inflation and asset appreciation then why was it never able to create such inflation in Japan? Thx...

Gerard said...

Nice Job!

Anonymous said...

I think this is good!

China will be forced to step up it's own economic programs and not depend on the US and Europe for it's income from exports to said countries.

This in turn will result with a vibrant local economy for China which will create a new breed of consumers.

Since the US consumers are already approaching "old age", they are not going to be able to revive the US economy like before with consumerism as the main foundation.

The United States will have to find a solution against cheap labor such as ramping up robotics to lower production cost and then EXPORT to the new breed of consumers in China.

This is going to take a long time and a long-term strategy for the US government and US international companies who have been "exporting" their manufacturing capacities and capabilities to China, India, and other developing countries.

China developing it's own economy will encourage other developing countries to start their own local consumer based econonomies instead of relying upon US and Europe for their exports.

This in turn will provide new incentive for US companies to develop new ways and means to be able to export into those booming developing countries in the medium to long term basis.

Short term. US and Europe will have to solve their current financial crisis that has deteriorated into a full blown economic crisis.