Fed keeps $85 billion-a-month bond purchase plan

[MNeagle]

http://www.marketwatch.com/story/fed-keeps-85-billion-a-month-bond-purchase-plan-2013-01-30-14911531


By Greg Robb



WASHINGTON (MarketWatch) - The Federal Reserve on Wednesday maintained its
aggressive easing policy stance in light of downside risks to the outlook. In a
statement after a two-day meeting, the Fed said it will keep buying $85 billion
a month in mortgage bonds and Treasurys. The Fed said that economic activity has
"paused in recent months" due to weather and other transitory factors. The Fed
did not say how long the bond purchases would last. The vote was 11 to 1. Kansas
City Fed president Esther George dissented, saying the Fed's loose policy stance
could lead to financial imbalances and higher inflation.

[joboo]

Everyone is doing it. It's the only way to keep a ponzi scheme running.

[madfranks]

The more they buy, the harder it will be to "unwind" them when the time comes.

How the Fed plans to unwind (http://therealrevo.com/blog/?p=89507)


Under the current exit plan, the Fed would soak up reserves by using reverse repurchase agreements or offering term deposits.

“I’m not sure we’ll really know, until they undertake a real program, what the effectiveness is”[...]

The Fed’s other tool is to extinguish reserves by selling bonds back to dealers. Even a fully-explained plan could push up home borrowing (inflation) costs as traders account for hundreds of billions of dollars of new supply flowing back into the market.

“We are deep into experimentation at this point,” Oliner said. “It’s understandable that people are worried.”

...

The bigger the balance sheet, “the riskier the exit becomes,” Richmond Fed President Jeffrey Lacker said

[madfranks]

Here's what I think is coming, from the comments section of the article I posed above:


this scenario DEMANDS an extremely robust super-Reaganesque recovery that re-instills faith in the dollar. Without that there would be no reason for a recovery of the dollar’s value. Unless our economy goes into overdrive this option is total fantasy. We simply can’t sell enough bonds to finance a 1.5 trillion deficit while competing with our central bank attempting to unload almost equal amts. Who in the fuck thinks notes written against increasingly worthless paper would generate ANY demand?

I posted about this a while back in another thread. When this scenario unfolds, Congress will try very hard to get the fed to keep buying and expanding its balance sheet. If the fed resists, one of two things will happen. Either the fed prevails and we go into a massive deflation accompanied by the greatest depression that will wipe out the majority of this country's wealth, or Congress will nationalize the fed and we will witness Zimbabwe style hyperinflation as Congress resorts to printing money to finance the deficits.

The lesson here is: buy as much gold and silver as you can, they will be one of the only assets left standing after these chickens come home to roost.