{"id":11035,"date":"2014-10-01T00:57:32","date_gmt":"2014-10-01T04:57:32","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=11035"},"modified":"2014-10-01T00:57:32","modified_gmt":"2014-10-01T04:57:32","slug":"qe-the-end-is-nigh","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2014\/10\/01\/qe-the-end-is-nigh\/","title":{"rendered":"QE: The end is nigh?"},"content":{"rendered":"

I have read a number of predictions recently as to how stocks will collapse into a bear market when quantitative easing ends. The red line on the graph below shows how the Fed expanded its balance sheet by $3.5 trillion between 2008 and 2014, injecting new money into the system through acquisition of Treasuries and other government-backed securities.<\/p>\n

\"Fed<\/p>\n

Many are not aware that $2.7 trillion of that flowed straight back to the Fed, deposited by banks as excess reserves. So the net flow of new money into the system was actually a lot lower: around $0.8 trillion.<\/p>\n

The Fed has indicated they will end bond purchases in October 2014, which means that the red line will level off at close to $4.5 trillion. If excess reserve deposits continue to grow, that would cause a net outflow of money from the system. But that is highly unlikely. Excess Reserves have been growing at a slower rate than Fed Assets for the last three quarters, as the graph of Fed Assets minus Excess Reserves shows. If that trend continues, there will be a net injection of money even though asset purchases have halted.<\/p>\n

\"Fed<\/p>\n

Interest paid on excess reserves is a powerful weapon in the hands of the FOMC. The Fed can accelerate the flow of money into the market by reducing the interest rate, forcing banks to withdraw funds on deposit in search of better returns outside the Fed. Alternatively, raising interest paid above the current 0.25% p.a. on excess reserves would have the opposite effect, attracting more deposits and slowing the flow of money into the market.<\/p>\n

The Fed is likely to use these tools to maintain a positive flow into the market until the labor market has healed. As Janet Yellen said at Jackson Hole<\/a>:<\/p>\n

“It likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after our current asset purchase program ends.”<\/p><\/blockquote>\n

That’s Fedspeak for “Read my lips: there will be no interest rate hikes.”<\/p>\n","protected":false},"excerpt":{"rendered":"

I have read a number of predictions recently as to how stocks will collapse into a bear market when quantitative easing ends. The red line on the graph below shows how the Fed expanded its balance sheet by $3.5 trillion between 2008 and 2014, injecting new money into the system through acquisition of Treasuries and … <\/p>\n

Continue reading “QE: The end is nigh?”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[1314,1358,1858,3439],"class_list":["post-11035","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-excess-reserves-on-deposit","tag-federal-reserve","tag-interest-rates","tag-total-assets"],"yoast_head":"\nQE: The end is nigh? - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"QE: The end is nigh? - the patient investor\" \/>\n<meta property=\"og:description\" content=\"I have read a number of predictions recently as to how stocks will collapse into a bear market when quantitative easing ends. 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The graph below shows that total assets leveled off at $4.5 trillion and have been maintained at that level since. But the graph also shows that the Fed\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16014,"url":"https:\/\/thepatientinvestor.com\/index.php\/2017\/09\/23\/the-big-shrink-commences\/","url_meta":{"origin":11035,"position":1},"title":"The big shrink commences","author":"Colin Twiggs","date":"September 23, 2017","format":false,"excerpt":"\"The Federal Reserve left its benchmark interest rate unchanged and said Wednesday that it would begin to withdraw some of the trillions of dollars that it invested in the US economy after the 2008 financial crisis.\" ~ Binyamin Applebaum The Federal Reserve balance sheet ballooned in the last decade to\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1375,"url":"https:\/\/thepatientinvestor.com\/index.php\/2011\/10\/17\/feds-kocherlakota-on-why-balance-sheet-expansion-need-not-be-inflationary-real-time-economics-wsj\/","url_meta":{"origin":11035,"position":2},"title":"Fed\u2019s Kocherlakota on Why Balance Sheet Expansion Need Not Be Inflationary – Real Time Economics – WSJ","author":"ColinTwiggs","date":"October 17, 2011","format":false,"excerpt":"I\u2019ve mentioned how the Federal Reserve has bought over $2 trillion of government securities. It has funded that purchase by tripling the amount of deposits held by banks with the Fed \u2014 what are called bank reserves. ....... Banks have few good lending opportunities, and so they\u2019re not trying to\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13216,"url":"https:\/\/thepatientinvestor.com\/index.php\/2016\/04\/28\/lighting-a-fuse\/","url_meta":{"origin":11035,"position":3},"title":"Lighting a fuse","author":"ColinTwiggs","date":"April 28, 2016","format":false,"excerpt":"The Fed quit quantitative easing more than a year ago, limiting total assets on its balance sheet to $4.5 trillion. But more than $2.5 trillion of cash injected into the financial system had been deposited straight back into the Federal Reserve system by banks as excess reserves, earning 0.25% p.a.\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Fed Total Assets and Excess Reserves","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-04-28-fedassets.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-04-28-fedassets.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-04-28-fedassets.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":11338,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/11\/16\/monetary-base-and-deflation\/","url_meta":{"origin":11035,"position":4},"title":"Monetary Base and deflation","author":"ColinTwiggs","date":"November 16, 2014","format":false,"excerpt":"The Monetary Base consists of currency in circulation and commercial bank deposits at the Federal Reserve. Currency in circulation includes notes and coins both in circulation and held in the vaults of commercial banks. Commercial bank deposits at the Fed can be further broken down into required reserves and excess\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"US Monetary Base minus Excess Reserves and Currency in Circulation ROC","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-16-mbase.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-16-mbase.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2014\/2014-11-16-mbase.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":7851,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/06\/03\/impact-of-qe-or-lack-thereof-is-reflected-by-excess-reserves\/","url_meta":{"origin":11035,"position":5},"title":"Impact of QE (or lack thereof) is reflected by excess reserves","author":"ColinTwiggs","date":"June 3, 2013","format":false,"excerpt":"JKH at Monetary Realism writes: ....there is a systematic tendency in the blogosphere and elsewhere to misrepresent the impact of QE in a particular way in terms of the related macroeconomic flow of funds...... Most descriptions will erroneously treat the macro flow as if banks were the original portfolio source\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/11035","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=11035"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/11035\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=11035"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=11035"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=11035"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}