Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Fed Set to Launch “Massive” Bond-Buying Program — In Other Words QE

  by    0   2

The Federal Reserve is set to begin what a MarketWatch article called a “massive” bond-buying program.

Jerome Powell announced the program last Tuesday and the central bank released more details about the plan on Friday. The Federal Reserve will buy $60 billion in short-term Treasury bills each month. According to a statement, the purchases will continue, “at least into the second quarter of next year.” That would amount to around $400 billion worth of Treasurys added to the Fed’s balance sheet.

But the balance sheet will likely expand more than that. The Fed also plans to use interest it earns off its portfolio to buy more Treasurys. And as they mature, it will take that money and buy more bonds, thus pumping up the balance sheet.

Powell insists this is not quantitative easing. During his speech last week, Powell said, “This is not QE. In no sense is this QE.” But as Peter Schiff said, this is precisely QE – no matter what you call it.

Of course, don’t confuse this with quantitative easing when the Fed was buying $85 billion a month of Treasuries, because this is no way quantitative easing except, of course, that’s exactly what it is.”

Peter isn’t the only person calling this QE. An analyst quoted by MarketWatch said, “In a very quiet and sneaky way, the Federal Reserve announced the start of a massive bond-buying program.” He went on to say, “The Fed does not wish for us to refer to it as quantitative easing or QE4. Yet, this is exactly what the Fed is doing but due to the timing and enormity of the program.” He also referred to the program as “debt monetization.”

Even Bloomberg confessed that the bond-buying program looks a lot like QE.

No matter how technical, this measure could prompt an indirect attempt to influence market risk-taking and the spillover to the broader economy. Taking advantage of the new demand for bills from the Fed, the Treasury could shift more of its issuance there, which, with an unchanged funding schedule, would lower the supply of longer-dated bonds, thereby increasing their price and lowering yields – just like QE2 and later QE3. In sum, it may not be a full-scale QE but it could be thought of as, pick your term, a lite/stealth/mini/shadow variant of it.”

The Fed’s move is in response to the recent meltdown in the overnight repurchase market. The Fed began repo operations a couple of weeks ago and then upped the ante last week in an attempt to inject cash into the banking system. According to the Fed, it will conduct longer-term repo operations two times per week at $35 billion each. The Fed will also continue overnight repo operations of at least $75 billion each.

Powell said the reason for balance sheet expansion is to maintain an “adequate supply of reserves.” As Peter explained, in simple terms, the central bank is trying to keep interest rates artificially suppressed.

Which is really code for, ‘We want to keep interest rates low.’ I mean, that’s what they’re trying to do. They need an adequate amount of reserves to artificially suppress interest rates. Well, that’s exactly what quantitative easing was. That was the policy goal. It was to artificially suppress interest rates, to have an interest rate that was lower than what the rate would be without the Fed intervening, without them doing quantitative easing.”

The US economy is built on debt and it cannot function in a high interest rate environment. Peter said this is why the central bank is desperate to keep interest rates low.

They’re trying to artificially manipulate interest rates so that they’re lower than they would otherwise be. The goal is to keep the cost of servicing all this debt low and to prop up asset prices — prop up stocks and prop up real estate. So, they’re basically doing exactly what they did under QE for the exact reasons they did it when they were doing QE, except they’re not calling it QE. And the reason they’re not calling it QE is because they don’t want to admit that they’re having to rescue the economy again. Because the success of quantitative easing was predicated on the fact that it was temporary. It was predicated on the Fed being able to reverse course.”

It’s clear now that temporary was not the reality. It was not temporary. And Peter has said before the scheme isn’t going to work again.

Download SchiffGold's Gold vs GLD EFT's Guide Today

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Gold ETFs Chart Seventh Straight Month of Inflows

Gold-backed ETFs closed out the first half of 2020 with their seventh consecutive month of inflows and significantly above the highest level of annual inflows, both in tonnage and US dollar terms. Globally, gold-backed funds added 104 tons of gold to their holdings in June. Global holdings now stand at an all-time high of 3,621 […]

READ MORE →

Fed Minutes Show No Sign of Backing Off Monetary Hail Mary

Don’t expect the Federal Reserve to pull back on its monetary Hail Mary anytime soon. The central bank released the minutes from the June meeting yesterday. There were no big surprises, but they did reaffirm the Fed’s commitment to continuing its unprecedented monetary policy into the foreseeable future.

READ MORE →

Citibank Joins Mainstream Gold Bulls Forecasting Record Prices

Citibank has joined other mainstream gold bulls calling for record gold prices. Citi raised its gold price forecast this week. It now projects a three-month price of $1,825 per ounce and for the yellow metal to head into record territory in 2021. Citi analysts expect gold to eclipse the $2,000 mark early next year.

READ MORE →

Which Corporate Bonds the Fed Has Bought So Far?

Earlier this month, the Federal Reserve announced it would begin buying individual corporate bonds. Now we have our first glimpse at what that means in practice. On Saturday, the Fed released a disclosure statement that lists the bonds purchased by the central bank.

READ MORE →

More Mainstream Bullishness for Gold

Earlier this week, we reported Goldman Sachs now forecasts record gold prices within the next 12 months. Well, Goldman isn’t the only mainstream player turning more bullish on gold.

READ MORE →

Comments are closed.

Call Now