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How The FED Prints Money- Part 4
This is part 4 in the video series on the effects of Quantitative Easing by Chris Ciovacco the Chief Investment Officer for Ciovacco Capital Management. To see the other parts How the FED Prints Money, How the FED Prints Money – Part 2, How The FED Prints Money- Part 3
How The FED Prints Money- Part 3
Last week we looked at who gets all the money the FED prints and before that we looked at the process the FED uses to get the money “Out of Thin Air” and into the hands of people who can spend it. Today we are going to look at what is “Quantitative Easing” well it sounds cool anyway… ~editor
What is Quantitative Easing? Fed’s Perspective & Writings
Part 3 in a 6 Part Video Series on Quantitative Easing
A Wall Street Journal article (10/27/10) on quantitative easing (QE) hints the Fed will take a middle of the road approach in terms of the size and duration of QE2. As we would expect, the stock and commodity markets’ initial reaction is negative. A middle of the road approach to QE seems counter intuitive to the Fed’s own historical analysis of why quantitative easing was ineffective in Japan. In CCM’s July 2010 review of James Bullard’s Seven Faces of “The Peril”, our read between the lines interpretation of Bullard’s take on QE included:
In order for quantitative easing to sufficiently increase future inflation expectations, market participants must believe the Fed will do “whatever it takes for as long as necessary” to obtain the objective of sufficiently positive inflation. This means the Fed must be willing to leave balance sheet expansion in place for as long as necessary to create expectations of higher future inflation by market participants (consumers, investors, companies, etc.). This reminds us of past “bazooka-like” policy moves, where policymakers would say, “You think we can’t create positive inflation? Just watch.” Continue reading
How the FED Prints Money – Part 2
Yesterday we looked at the process the FED uses to get the money “Out of Thin Air” and into the hands of people who can spend it. In other words the “how” they do this magic. Basically, that route is through special dealers and then it goes into a few select hands. Today we are not going to look at the “how” but instead we will look at “Who” gets the money and where it is likely to go from there. Because if we know where it is likely to go we can get there first and profit from the incoming cash flow. ~editor
Quantitative Easing (QE2): Who Gets the Fed’s Printed Money?
Part 2 of a 6 Part Video Series on Quantitative Easing: In Part 1: How the FED Prints Money, we discussed how Mr. Bernanke’s quantitative easing program is implemented via the Fed’s eighteen primary dealers, not traditional banks.
We do not know the size of the Fed’s program, nor do we know how the markets will react in the short-term. However, one thing we know with near certainty – a large quantity of newly printed money is going to flow from the Fed to the eighteen primary dealers. We also know a significant amount of the electronic greenbacks will flow from the primary dealers into the accounts of their clients.
Since the Fed encourages the primary dealers to offer client bonds in the QE competitive bidding process, it is helpful for investors to know more about the clients of the primary bond dealers. Sovereign wealth funds, who do business with numerous primary dealers, will be one of the most influential groups who may participate in Continue reading
How the FED Prints Money
The process of “printing” money is always a kind of mystery to most people. The new government speak for this process is “Quantitative Easing”. In this video Chris Ciovacco explains the process of creating money out of thin air. ~editor.
Video: Quantitative Easing Targets Asset Prices, Not Bank Reserves
With markets coming off of overbought levels, bullish sentiment high, and gold backing off a vertical ascent, we believe investors need to be ready for a quantitative easing (QE) disappointment pullback. A “buy the QE rumor, sell the QE news” event needs to be considered from a portfolio management perspective. Having said that we also believe most investors and many financial professionals do not fully understand how QE works in the real world and that one of QE’s primary objectives is to inflate asset prices.
After hearing “QE won’t matter, the money will just sit at banks as excess reserves” from talking heads several times over the past three months, we decided to put together a series of brief videos describing how quantitative easing will be implemented by the Fed and the eighteen primary broker dealers in the coming weeks and months. You may be surprised to learn Continue reading
M3 Money Supply Numbers are Back- Sort Of
Back in March of 2006 I told you the U.S. Government was hiding something and that something was the growth in the money supply as measured by M3.
Back then the Federal Reserve tracked and published the money supply measured three different ways– M1, M2, and M3.
Each of these three money supply measures track slightly different views of the money supply.
The most restrictive, M1, only measures the most liquid forms of money; it is limited to currency actually in the hands of the public. This includes checking accounts travelers checks, and other deposits against which checks can be written. Of course the money supply is much bigger than that. What about savings accounts?
M2 includes all of M1, plus savings accounts, time deposits of under $100,000, and balances in retail money market mutual funds. But if you have money in a money market mutual fund would you consider that money? Of course so there is M3. Continue reading
Understanding the FED
How to protect yourself from the common and misleading myths about the U.S. Federal Reserve
Over the years, occcasionally I have received comments from subscribers about the SHAM of the FED and how U.S. Taxpayers are being swindled. And although I knew the truth of it, I was unable to shed any new light on the subject. Today our friends at Elliottwave have provided a new resource that will teach you everything you wanted to know – plus some things you might wish you didn’t – about the U.S. Federal Reserve Bank.
Since the Federal Reserve Act of 1913, the Federal Reserve Bank has been a secret, quasi-government agency. It’s time to pull back the curtain on the Federal Reserve system. In this revealing ebook, you’ll learn how the Federal Reserve controls the money supply, you’ll pin-point a few critical points in Federal Reserve history, and you’ll uncover several important myths and misconceptions, like who owns the Federal Reserve Bank.
In this eye-opening report you’ll learn not only the mechanizations of the FED but also the real motivations for being the United States’ “lender of last resort.”
