QE 1.5

by Larry Levin


Today was the day the Federal Reserve was supposed to "save" the stock market. It was said up & down the financial press that the economy was suddenly so bad, that it was good. Said another way, the economy was suddenly so bad (and this "just happened?") that the Federal Reserve had to massively print more money to save more banks and maybe the Treasury itself. According to the shills on Fraud Street, this will send stocks to the moon and of course, the debt never matters.

How is this a good thing again?

As it turned out the Fed "almost" announced QE 2.0 Tuesday. The market expected the Fed to double its balance sheet yet again but instead said that it will try to keep the balance sheet unchanged.

The following are a few of the statements in the Fed's press release...

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. (Because the economy actually sucks, regardless what we put in print.)

Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. (Because the economy actually sucks, regardless what we put in print. Moreover, business are afraid of the coming tax hikes from the clown posse in Congress.)

Housing starts remain at a depressed level. (Because the economy actually sucks, regardless what we put in print.)

Bank lending has continued to contract. (Because the economy actually sucks, which makes those who want loans riskier than normal, regardless what we put in print.)

Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated. (Because the economy actually sucks, and we really have no idea what to expect.)

But here is the money sentence...To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.

In testimony to Congress on June 3rd of last year, Zimbabwe-Ben Bernanke was asked directly "Will the Federal Reserve monetize this debt?" Of course the answer given by, Ben "Sir Prints-A-Lot" Bernanke, was "The Fed will not monetize the debt." A direct answer - and a lie.

Given today's policy shift, Ben Shalom Bernanke, deserves all of the nicknames I can think of including; Helicopter-Ben, Zimbabwe Ben, Sir Prints-A-Lot, and any others you care to suggest. When the central bank buys the debt of the Treasury, the country has started down the road to ruin.

Google Wiemar Republic and Zimbabwe inflation rate. Then pray "but it's different this time."



Previous Day's Trading Room Results:

Trade Date: 8/9/10

E-Mini S&P Trades*
(before fees and commissions):


1) No "Secrets" trades filled today.

2) Algorithm positions (9)

3) “Reading the Tape” positions (8) …combined Secret’s, Algo, & “Reading the Tape” total -2.75



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