Operation Twist: Fed Ready for QE3

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Kurt Nimmo
Infowars.com
September 19, 2011


Daily Forex Fundamentals, written by Danske Bank, says the FOMC will probably get QE3 rolling by the end of the year or early in 2012

“Following the continued deterioration in economic data, we expect the Fed to take action in the form of a twist in the central bank’s portfolio towards longer maturity government bonds,” the Danish bank writes.

Unless we see significant improvements in economic data over the next couple of months we deem it likely that the Fed will initiate QE3 (buying either more government bonds or mortgages). This could happen either by end 2011 or early next year. We will particularly be looking to employment data, where we need sustainable and significant improvement in the coming months, in order for QE3 to be taken off the table.

The Federal Open Market Committee (FOMC) meets on Wednesday and more information on QE3 is expected at that time.

The main scenario for the Wednesday meeting will be for the Fed to start shifting its portfolio of government bonds towards holding more long-term securities and fewer short-term securities. This extension of the portfolio’s maturity is designed to push down long-term interest rates. We see this as a highly likely outcome of the meeting.

The interest rate currently stands at 0.25% and the Fed may move it down to 0.10%, “in order to increase the banks’ incentive to lend.”

Big banks, however, are not in the business of lending money to Main Street. Since the fall of Glass-Steagall, banks have been in the business of buying and selling complex derivatives and writing credit default swaps. “Fees are good, bonuses come in, and the fed or government will always be there to bail them out if things get hairy,” notes UrbanDigs.com.

Interest rates at or near 0% guarantee capital destruction. “Capital destruction is the main byproduct of monetary inflation, a concept totally foreign to the inflation engineers at the USFed and its satellite central banks,” writes Jim Willie for Financial Sense.
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