Why, if the US stock market recovery is such robust full effect, does the Fed find it necessary to print $5 billion new dollars every week from now till mid October?
That is what they have announced they are going to do. Every week the FED will buy back Treasury bonds with new dollars it will have just printed. The Big Banks will form a neat line every morning and one by one, at the POMO window (Permanent Open Market Operations) will tender the Treasury Bonds they only just purchased, which the Fed will buy. The Banks will then stroll home clutching 5 billion new dollars which they will pump, NOT into loans, but into the stock market.
Thus the US sells its debts, which are being taken more and more by the ‘Primary Dealers’ AKA the Big Banks, who later walk from the Treasury to the Fed where they ‘sell’ that debt to the Fed in return for new US Treasury Dollars. The net result of passing debt and dollars from hand to hand is that the Fed is pumping billions of dollars into the markets every week. Print and enjoy!
The US is now in to something a little more than a tipple of QE lite. This is QE straight up. A stiffer drink for those whose need has grown.
Today the Banks sold the Fed $3.4 Billion. The resultant increase in easy money supplied to the banks and market is clearly intended to make sure that the Dow Jones and the S&P do NOT decline this autumn. This is financial anti-depressants being mainlined. Whatever the real dangers and pain the market will feel nothing. It will exist in a government supplied haze of positive feelings. This is to be a positive autumn no matter how many dollars the Fed has to print up to do it.