Fed Balance Sheet hits $4 trillion
The Federal Reserve’s balance sheet expanded to a record $4 trillion in the week ended December 18th. The Fed balance sheet has expanded thanks to QE buying $85 billion a month in Treasurys and mortgage related assets since last January. The Fed’s balance sheet has expanded from $891 billion in 2007 without creating inflation. This is only one side of the coin. The other is the fiscal side that is controlled by Congress.
The Fed now holds $1.5 trillion in mortgage-related assets and $2.2 trillion in Treasurys. The central bank also holds $326 billion in other assets. The junk bonds from mortgages the banks dumped on the Fed will eventually become a drag. But like any program, once implemented, it is hard to stop.
The inflation will not come from the monetization by the Fed, but rather the rise in interest rates will send the deficit upward sharply and here is where the appetite for US debt will begin to decline. This is where rates will be forced higher. We are likely to see inflation in prices in the years ahead, but this will be driven by a rise in taxation and those we will end up with stagflation. GDP growth jumped sharply, but this was largely caused by building inventories for Christmas.
The real crisis is the Fed has boxed itself in. It cannot reduce its balance sheet without worrying it will cause a recession. The Fed has disarmed itself with QE and maintaining rate far too low to help the banks. This is a crisis waiting to happen.
The Federal Reserve’s balance sheet expanded to a record $4 trillion in the week ended December 18th. The Fed balance sheet has expanded thanks to QE buying $85 billion a month in Treasurys and mortgage related assets since last January. The Fed’s balance sheet has expanded from $891 billion in 2007 without creating inflation. This is only one side of the coin. The other is the fiscal side that is controlled by Congress.
The Fed now holds $1.5 trillion in mortgage-related assets and $2.2 trillion in Treasurys. The central bank also holds $326 billion in other assets. The junk bonds from mortgages the banks dumped on the Fed will eventually become a drag. But like any program, once implemented, it is hard to stop.
The inflation will not come from the monetization by the Fed, but rather the rise in interest rates will send the deficit upward sharply and here is where the appetite for US debt will begin to decline. This is where rates will be forced higher. We are likely to see inflation in prices in the years ahead, but this will be driven by a rise in taxation and those we will end up with stagflation. GDP growth jumped sharply, but this was largely caused by building inventories for Christmas.
The real crisis is the Fed has boxed itself in. It cannot reduce its balance sheet without worrying it will cause a recession. The Fed has disarmed itself with QE and maintaining rate far too low to help the banks. This is a crisis waiting to happen.
Global Market Watch Dec 20th
The Global Market Watch has been posted for the close of December 20th, 2013.
The Global Market Watch has been posted for the close of December 20th, 2013.
Dow Jones Outlook
The Dow made new highs and achieved the high closing yesterday and this has set the stage for a rally that could extend into Monday/Tuesday next week. A closing above 1611225 today will signal that some further upside is likely.
Keep in mind that we are pressing against key resistance in the 16650 area. The oscillators are also at the top and warn that we will see a correction before breaking through and running to the upside out of the uptrend channel. There will be a retest of support. The pattern is critical if we see that into Feb, or do we get a high into that period and a decline thereafter into the summer.
The Dow made new highs and achieved the high closing yesterday and this has set the stage for a rally that could extend into Monday/Tuesday next week. A closing above 1611225 today will signal that some further upside is likely.
Keep in mind that we are pressing against key resistance in the 16650 area. The oscillators are also at the top and warn that we will see a correction before breaking through and running to the upside out of the uptrend channel. There will be a retest of support. The pattern is critical if we see that into Feb, or do we get a high into that period and a decline thereafter into the summer.
Puerto Rico Teachers Protesting over Cuts in Pensions
A reader from Puerto Rico writes: “Teachers took over the PR Capitol to demonstrate against the move of the government to reform their pension funds. Puerto Rico is a preview of whats coming. Thanks for all your work!!”
Indeed, you have to find this story way down in New Zealand. So much of this pension crisis is global. The rise in this crisis is where civil unrest emerges. Before 2014 in Europe, it was non-violent as with the occupy Wall Street. This is now starting to turn much more violent. Very fascinating. What they taught you in history class with all the ramifications of wars for noble reasons was all nonsense. Just follow the money.
A reader from Puerto Rico writes: “Teachers took over the PR Capitol to demonstrate against the move of the government to reform their pension funds. Puerto Rico is a preview of whats coming. Thanks for all your work!!”
Indeed, you have to find this story way down in New Zealand. So much of this pension crisis is global. The rise in this crisis is where civil unrest emerges. Before 2014 in Europe, it was non-violent as with the occupy Wall Street. This is now starting to turn much more violent. Very fascinating. What they taught you in history class with all the ramifications of wars for noble reasons was all nonsense. Just follow the money.
Model Design – Hey Look at This!
QUESTION: Mr. Armstrong; I believe reading between the lines, you discovered something incredibly important yet everyone looks at you in the wrong way as if this is all some theory you began with in the traditional manner. Things like random walk are theories to justify someone who could not discover anything so they created a theory to say why they failed. You seem to be the exact opposite. This is one giant extraordinary adventure for you. Is this correct?
Best regards
UT
ANSWER: That is an insightful observation. Yes, you are correct. What I discovered is the incredible design structure, not my theory of how the world should work like Marx or Keynes. I am fascinated by how everything functions. How does the computer target this week as a Panic Cycle 3 months ago? Why did Congress cut a budget deal extending it on autopilot until September 30th, 2015 the precise day of the high of this wave 2015.75? How can the computer predict war accurately when I did not consciously try to do that? This is not me coming up with a theory. This is me stumbling upon something that has incredible order hidden deep within, which is fascinating.
I am the interpreter – not the protagonist. That is why the model is my protection and someone else’s death sentence. They need me and my experience with it for someone who stole it would be clueless where to even begin. I am working on modules so it can express these concepts to enable it to articulate what I have observed concerning its revelations of this amazing hidden order. So yes. My approach was that of Adam Smith, observe and try to ascertain how it functions rather than try to manipulate it into the manner I think it should function. Australia learned the hard way. They imported various animals to do certain things and discovered they altered the biological landscape because they had no natural predators. No matter how subtle the interference, every action we take sends shock-waves through the entire system. We cannot manipulate society and only when we realize that will we advance to the next level of the game. Government is messing with things they do not comprehend. Lower interest rates to help the banks and you destroy pension funds and the livelihood of retired people forcing the elderly back to work at places like McDonalds.
I suppose you have hit the nail on the head. This has been one giant adventure of discovery for me. It has kept me young because I constantly learn from it. The most subtle aspects you would typically overlook turn out to be definitive clues to its structural success of the overall design. I would not say, like Goldman Sachs, that I am doingGod’s Work. Instead, I am trying to understand that work that is highly complex and a structural design built upon an intricate system of self-referral. Everything is replicating itself from one level of activity to the next higher generation just as you have children that are constructed from your DNA and they share your traits. It is why history repeats like a Shakespeare play enacted for centuries, only the actors changes. This is how the future is revealed and the more we change, the more we remain the same.
So I am the interpreter – not the inventor. This is not my THEORY, it is my OBSERVATION of the hidden structure upon which everything is built. It was not my hand that created this system. I am merely the one saying – hey – look at this!
QUESTION: Mr. Armstrong; I believe reading between the lines, you discovered something incredibly important yet everyone looks at you in the wrong way as if this is all some theory you began with in the traditional manner. Things like random walk are theories to justify someone who could not discover anything so they created a theory to say why they failed. You seem to be the exact opposite. This is one giant extraordinary adventure for you. Is this correct?
Best regards
UT
ANSWER: That is an insightful observation. Yes, you are correct. What I discovered is the incredible design structure, not my theory of how the world should work like Marx or Keynes. I am fascinated by how everything functions. How does the computer target this week as a Panic Cycle 3 months ago? Why did Congress cut a budget deal extending it on autopilot until September 30th, 2015 the precise day of the high of this wave 2015.75? How can the computer predict war accurately when I did not consciously try to do that? This is not me coming up with a theory. This is me stumbling upon something that has incredible order hidden deep within, which is fascinating.
I am the interpreter – not the protagonist. That is why the model is my protection and someone else’s death sentence. They need me and my experience with it for someone who stole it would be clueless where to even begin. I am working on modules so it can express these concepts to enable it to articulate what I have observed concerning its revelations of this amazing hidden order. So yes. My approach was that of Adam Smith, observe and try to ascertain how it functions rather than try to manipulate it into the manner I think it should function. Australia learned the hard way. They imported various animals to do certain things and discovered they altered the biological landscape because they had no natural predators. No matter how subtle the interference, every action we take sends shock-waves through the entire system. We cannot manipulate society and only when we realize that will we advance to the next level of the game. Government is messing with things they do not comprehend. Lower interest rates to help the banks and you destroy pension funds and the livelihood of retired people forcing the elderly back to work at places like McDonalds.
I suppose you have hit the nail on the head. This has been one giant adventure of discovery for me. It has kept me young because I constantly learn from it. The most subtle aspects you would typically overlook turn out to be definitive clues to its structural success of the overall design. I would not say, like Goldman Sachs, that I am doingGod’s Work. Instead, I am trying to understand that work that is highly complex and a structural design built upon an intricate system of self-referral. Everything is replicating itself from one level of activity to the next higher generation just as you have children that are constructed from your DNA and they share your traits. It is why history repeats like a Shakespeare play enacted for centuries, only the actors changes. This is how the future is revealed and the more we change, the more we remain the same.
So I am the interpreter – not the inventor. This is not my THEORY, it is my OBSERVATION of the hidden structure upon which everything is built. It was not my hand that created this system. I am merely the one saying – hey – look at this!
NSA Task Force Report – Are We Entitled To Our Files?
The White House task force report on the NSA has shocked many proving that Snowden is indeed a hero and not a traitor. The report has revealed that not even those who supervised the NSA knew what was going on. The Task Force recommends sweeping reforms that Obama really cannot now ignore. The report was released just days after the federal judge in the Washington DC District Court slammed the NSA’s collection of telephone metadata as likely to be unconstitutional no less unethical. The Task Force has urged limits on NSA spying but does not suggest stopping the practice altogether.
RT has reported that Putin has come out and made a statement: “I envy Obama because he can spy on his allies without any consequences.” The real interesting question is should someone now file for aFreedom of Information Act Request to see everything in their file collected by the NSA and various agencies? When the Berlin Wall fell and the government shortly thereafter, East Germans were able to get their files that the Stasi had collected. I personally know people from the East who upon reading their files were shocked at how neighbors were reporting on them. People they thought were friends were spying on them. What would Americans do if they were able to get their files and see how EVERY phone call they have made is there along with emails and surfing the internet by Google Search. How tolerant would the public be when they really understood to what extent they have been tracked?
I have one friend who applied to be a police officer. The questions he had to answer included every girlfriend he had back to high school. And what will they do with that information? Go interview them and ask did they have willing sex or were they duped being promised he would love them for the rest of their lives? (Meatloaf Paradise by the Dashboard Lights). To what extent are there dossiers on everyone in the United States?