Debt Lord speaks...
The new program, or QE3 as it is called, is $40 billion per month of MBS, but there's another $45 billion of Treasury monetization that's already taking place every month via Operation Twist, as well as the Fed's ongoing reinvestment of proceeds from maturing mortgage and agency debt, bringing the total to a cool $85 billion every 30 days, or roughly $300 billion between now and Christmas.
More detail on the lesser-known QE program.
Cue the spike in MBS pricing in 3,2,1...
I wrote the following passage 21 months ago when Bernanke was basking in the overconfident glory of QE2 and was actually discussing Fed strategies for shrinking its $3 trillion balance sheet. I said at the time that QE2 would fail and there would be much more printing to come. Today we come full circle. Again.
Ben seeks to reassure those concerned that the Federal Reserve does indeed have an exit strategy for its massive asset purchases and ponzi-inflated balance sheet. The only 2 things the failed Chairman got wrong in this announcement were the the timing and the direction.
What he meant to say was that the recession would last a decade, unemployment would skyrocket and then would plateau instead of subsiding, that housing prices would fall an additional 10%, and that he the great Bernanke would in fact increase asset purchases not decrease them, let alone, god forbid, actually sell a pile of crap or two, and that he might even consider creating a brand new national debt monetization program with proceeds from the previous $1. 5 trillion mortgage backed securities debt monetization program, and that still nothing would work, but not to worry because the helicopter was not working right and as soon as he got it fixed, that all would be well.