Peter Schiff: 'Fed Has No Possibility of Withdrawing Stimulus'

[acptulsa]

I wasn't excusing anything.

The bush the soldier hides in doesn't excuse the soldier for his murderous intent, either.

You were providing the inexcusable with cover, as usual--and unlike the shrub, you were providing active cover.

Come, it's a new year. Tell us why you spend some forty or more hours a week actively providing these bastards with cover for their nefarious activities.

 

[John X]

Exactly--he is consistent so he will be right eventually..and meanwhile how are his clients doing?

Yeah...and he recommended gold and gold miners at the top of the bubble.....no different from the housing bulls, tech bulls or Dow 36K morons. Any idiot can just pick a price and refuse to admit missing massive bubbles or not understanding hugely important factors in future price.

 

[Danke]

It was the biggest emergency economic stimulus in history and now it’s over. The U.S. Federal Reserve’s once-in-a-lifetime program to buy immense piles of bonds, month after month, in an extraordinary effort to restart a recession-deadened economy came to an end in October after adding more than $3.5 trillion to the Fed’s balance sheet – an amount roughly equal to the size of the German economy. The bond-buying program, called quantitative easing or QE, had been controversial since its start in 2009, as had the Fed’s decision in 2013 to gradually reduce the monthly economic boost, a plan that became known as the taper. Whether the Fed tapered too soon, given global economic weakness, or too late, given signs of bubbles in some markets, was hotly debated. But even after the taper’s end the Fed continued to pump support into the economy the old-fashioned way, by holding its interest rates near zero.

The Situation

The taper began in December 2013 and ended with a final $15 billion purchase in October 2014. Before the taper began there had been anxiety over how global markets would react, and in fact currencies and stock markets in emerging markets fell steeply in mid-January 2014, as investors prepared for U.S. interest rates to rise. But markets rebounded, interest rates stayed low and the Fed stuck with its plan. Janet Yellen, the Fed chair, walked a fine line, assuring the markets that its benchmark interest rate would remain near zero for a “considerable time” after the taper’s end. In October, she hinted that the Fed may hang onto the bonds for years, which could give the economy a QE-like boost even after QE itself has been tapered out. The Fed also announced it would reinvest the proceeds from its bonds, which would have the effect of a bit more stimulus.

The Background

The idea behind QE is that you don’t need a printing press to add money to an ailing economy. The Fed’s usual method of fighting recessions is to push down the interest rates banks charge each other for overnight loans, which allows banks to offer cheaper loans to businesses. But the Fed cut that rate almost to zero during the financial crisis five years ago, and more was clearly needed. So the Fed began buying bonds in hopes of driving down long-term rates that are usually outside its control. It wasn’t a new idea, but it had never been tried on such a massive scale. In the months after the crisis, the Fed bought $1.75 trillion in bonds. In 2010, with the recovery flagging, it bought $600 billion more in what was called QE2. In September 2012, with joblessness stubbornly high, the bank began snapping up $85 billion a month in Treasuries and mortgage-backed securities – QE3. Unlike earlier rounds, the Fed’s purchase plan was described as open-ended, with officials saying it would continue until the labor market “improved substantially.” The idea was that reducing the bond purchases gradually — that is, tapering them off — would make clear that the central bank would continue to offer support for the economy, just at lower levels.

The Argument

... But Fed officials have been at pains to convince investors that the end of the taper does not mean the end of stimulus. The near-zero interest rates they plan to leave in place until the labor market has recovered further would in ordinary times be seen as a massive stimulus; there just won’t be an extraordinary stimulus of massive bond purchases on top of it anymore.

 

[Zippyjuan]

Not selling or re-investing mature bonds has no net impact on money in the economy. If I get $1000 for a bond I have that is now mature and buy another $1000 bond with the proceeds I still have $1000 in bonds. I don't expect the Fed to try to sell their bonds but will eventually start letting them mature. They probably will continue to roll them over for quite a while though.

 

[Dforkus]

So you admit that he will eventually be right, gold will go to $5,000, but we shouldn't listen to him because......???

predictions about what something eventually might do are useless... No better than the preacher constantly screaming that the end is nigh, but never actually saying when..
[

Most of his clients have done just fine and will be far better off than the people who don't listen to him.

Not a chance, his repeating admonitions in 2009, to run from U.S. equities into foreign equities was horrible advice, and anyone who followed it missed out on one of the best bull market runs in history...

 

[jon4liberty]

Seriously Schiff haters? I am not the biggest fan of Schiff but you all clearly show you have no sense of economics. " but but QE has ended". LOL you are right. Japan has taken over that duty. They turned up the printing pressed and are buying the US bonds now instead of the Fed through QE. The Fed still has rates at zero. If the economy is that strong why are they not raising them? Why are we no longer the biggest economy? Why is our labor force down? why is welfare at an all time high? Why don't they include food and housing in the CPI? Silver is a perfect example demand is incredibly high yet prices keep getting lower. You all have to be paid trolls, because no one can be that idiotic.

 

[Zippyjuan]

Seriously Schiff haters? I am not the biggest fan of Schiff but you all clearly show you have no sense of economics. " but but QE has ended". LOL you are right. Japan has taken over that duty. They turned up the printing pressed and are buying the US bonds now instead of the Fed through QE. The Fed still has rates at zero. If the economy is that strong why are they not raising them? Why are we no longer the biggest economy? Why is our labor force down? why is welfare at an all time high? Why don't they include food and housing in the CPI? Silver is a perfect example demand is incredibly high yet prices keep getting lower. You all have to be paid trolls, because no one can be that idiotic.

1) Japan QE doesn't benefit the US. Unless it leads to Japan importing more things from the US.
2) the economy IS stronger. But it is not showing signs of growing TOO FAST yet which is why the Fed hasn't started to step on the brakes by raising interest rates.
3) US not the biggest economy- actually we still are. China is #2 (our GDP is $16 trillion a year- theirs is about $9 trillion) but they also have a few billion more people than we do. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
4) Why is our labor force down- some of that is boomers retiring- they are doing so at a rate of about 300,000 a month. Labor force participation is unchanged for more than a year now. http://www.pbs.org/newshour/making-sense/is-baby-boomer-retirement-behi/
5) Welfare? I don't have an answer.
6) Why food and housing not included in the CPI? They are. http://www.bls.gov/cpi/cpifaq.htm

What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

(items in parentheses are examples- not complete lists- CPI covers over 60,000 items).

 

[jon4liberty]

1) Japan QE doesn't benefit the US. Unless it leads to Japan importing more things from the US.
2) the economy IS stronger. But it is not showing signs of growing TOO FAST yet which is why the Fed hasn't started to step on the brakes by raising interest rates.
3) US not the biggest economy- actually we still are. China is #2 (our GDP is $16 trillion a year- theirs is about $9 trillion) but they also have a few billion more people than we do. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
4) Why is our labor force down- some of that is boomers retiring- they are doing so at a rate of about 300,000 a month. Labor force participation is unchanged for more than a year now. http://www.pbs.org/newshour/making-sense/is-baby-boomer-retirement-behi/
5) Welfare? I don't have an answer.
6) Why food and housing not included in the CPI? They are. http://www.bls.gov/cpi/cpifaq.htm


(items in parentheses are examples- not complete lists- CPI covers over 60,000 items).

oh Zippy.....

1.) Japan is buying the bonds now, the US treasury bonds. Tell me how that DOESN'T help the US. you are a really good troll.
2.) 15% drop in the Christmas spending.....your definition of success is a very strange one....
3.) China is 16.9 trillion US is 16.7 trillion. Maybe not use Wikipedia as your source idiot
4.) They are plenty of part time seeking full time and can't get FT jobs. More obamacare resolutions coming into effect in 2015 SWHTF
5.)...
6.) http://www.shadowstats.com/alternate_data/inflation-charts

Does trolling pay that well Zippy? I value my reputation and have self respect I guess those don't concern you

 

[dannno]

predictions about what something eventually might do are useless... No better than the preacher constantly screaming that the end is nigh, but never actually saying when..

That's not true at all... If you know for a fact that the US economy is highly manipulated and subject to a huge dollar crash, that is a good thing to know whether it is a month away or 20 years away. You can continue to invest in the current manipulated economy, I wish you luck with that.. In fact I have some money invested in the current fake economy as well, but I'm also hedged..just know that the profits you make in the short term may eventually be completely wiped out. It is good to have a hedge in gold and foreign stocks.

Not a chance, his repeating admonitions in 2009, to run from U.S. equities into foreign equities was horrible advice, and anyone who followed it missed out on one of the best bull market runs in history...

Peter Schiff also missed out on the .com bubble and he was perfectly ok with that.. in fact he talked to prospective clients during the .com bubble and tried to reason with them, telling them that it would eventually crash and when it did he gained a lot of clients who ended up LOSING money in the .com bubble that was another one of the 'best bull market runs in history'.

 

[Zippyjuan]

oh Zippy.....

1.) Japan is buying the bonds now, the US treasury bonds. Tell me how that DOESN'T help the US. you are a really good troll.
2.) 15% drop in the Christmas spending.....your definition of success is a very strange one....
3.) China is 16.9 trillion US is 16.7 trillion. Maybe not use Wikipedia as your source idiot
4.) They are plenty of part time seeking full time and can't get FT jobs. More obamacare resolutions coming into effect in 2015 SWHTF
5.)...
6.) http://www.shadowstats.com/alternate_data/inflation-charts

Does trolling pay that well Zippy? I value my reputation and have self respect I guess those don't concern you

Shadowstats also includes food and housing in their inflation calculation. They use the same methods- Shadowstats just uses a 1990 basket of goods (what people were buying and in what ratios back then) instead of a 2010 basket of goods the CPI uses. When Shadowstats recently updated their basket from 1980 t0 1990, they cut their estimate of the rate of inflation in half. If they update to the latest basket the rate will drop more. 1990 for example has nothing like cell phones or LCD TVs. Things people can and do buy changes over time. If the basket includes things people no longer buy (like a horse and carriage instead of cars) or leaves off things they do (like cell phones which almost everybody has now) the figure loses meaning.

Japan QE- they are buying Japanese bonds- not US Treasury bonds. http://www.economist.com/blogs/banyan/2014/10/japans-quantitative-easing

To do so, it will hoover up still larger quantities of Japanese government bonds (JGBs). This additional step, said Haruhiko Kuroda, the governor of the BoJ, “shows our unwavering determination to end deflation”.

The bank’s action is also an admission of partial failure thus far. Its bond-buying has succeeded in sparking some inflation, yet its goal of achieving price rises of 2% a year by around April 2015 remains a distant possibility. Along with the government, it badly underestimated the dampening effect of a hike in the consumption tax in April this year, which caused the economy to shrink by 1.7% in the second quarter. Because of faltering consumer and corporate demand, and falling oil prices, inflation is now heading in the wrong direction, and may dip beneath 1%.

Christmas drop in spending (eleven percent) only reflects a few days of shopping. Final figures are not in yet. Third quarter growth for the entire economy was five percent.

Thanks for the update on China GDP. Darn. Things suck. We are only #2 behind a country with 1.4 billion people (we are only 330 million by comparison). In 2008, GDP was $14.7 trillion. It has risen to $16.1 trillion since then. Things have really gotten worse- haven't they?

There are always people with part time jobs seeking full time jobs. True not everybody who wants a job has one but more people have been finding them. Currently of 19.6 million part time workers, 2.4 million said they have them because they could not get a full time one (down slightly from 2.5 million a year ago). Part time jobs can sometimes lead to full time positions. http://www.bls.gov/news.release/empsit.t08.htm One year ago the unemployment rate was seven percent. Today it is 5.9%.

Things are not perfect- I agree. But they have certainly improved a lot from where we were in 2008/ 2009.

 

[Bossobass]

In 2008, GDP was $14.7 trillion. It has risen to $16.1 trillion since then. Things have really gotten worse- haven't they?

"If I borrow a million dollars, I'll be a millionaire. But, one day the bill will come in the mail and what then?"
Ron Paul

In 2008, the "national" debt was $10 trillion. It has risen to nearly $19 trillion since then. Depends on your perspective whether or not things have gotten worse since 2008. Apparently, shills think the Fed gets better with age and thinking people just think shills blow.

 

[gonegolfin]

Not selling or re-investing mature bonds has no net impact on money in the economy. If I get $1000 for a bond I have that is now mature and buy another $1000 bond with the proceeds I still have $1000 in bonds.

Your interest rate risk increases when you re-invest, as the term to maturity changes. This is important when assessing the picture of the Fed balance sheet.

I don't expect the Fed to try to sell their bonds but will eventually start letting them mature. They probably will continue to roll them over for quite a while though.

They have no choice. Traditional monetary policy, where supply and demand for reserves in the banking system determines short term interest rates (and influences rates farther out on the curve), is dead. Now they have no other option than to set short term interest rates artificially with an iron fist (IOR), while manipulating long term rates and most importantly introducing significant interest rate risk to their portfolio (which backs our currency). The balance sheet composition is at deeply concerning levels w/respect to "term to maturity" (a significantly new normal). This has the effect of the Fed balance sheet being bloated for decades … as selling to exit is not an option.

Brian

 

[Zippyjuan]

Welcome back Brian!