Via: Zero Hedge
Via ‘Lucas Jackson’,
Fed Creates A New $4.25bn Asset Manager Every Business Day in March
There is ample debate going on in the market right now about the long-term effects of the Fed’s seemingly never-ending QE. The well-respected Stanley Druckenmiller was on CNBC this morning defending his recent commentary that the mal investment currently being instigated by the Fed can only end poorly. The counter-point was provided by former Fed governor Kevin Warsh who in his best status quo pleasing way essentially said Bernanke is in charge and all is well.
Perhaps it is, perhaps it isn’t. Personally, in the debate between a Fed governor academic and a man who successfully managed billions of dollars for decades, I’ll put my money behind Mr. Druckenmiller any day of the week and twice on Sundays!
But I’m not smart enough to know what will be the result of the Fed’s latest monetary experiments. Perhaps all will be well. Perhaps the magical money multiplier really works and is higher than anyone thinks? Perhaps the wealth effect is just about to kick in. Perhaps inflation really is low and muted, as Bernanke keeps repeating. Perhaps housing is recovering despite a continuing decline in real wages. Who knows? I don’t.
But one thing I do know is that the Fed’s hands are all over markets today. Consider for a moment the current QE program.
QE aka Money for Nothing
In March, there are exactly 20 business days. Also in March, the Fed will commit to purchase via their Permanent Open Market Operations (POMO) approximately $85bn in securities from the TBTF primary dealers. The $85bn in cash (not real cash but actually 1s and 0s in an electronic account) didn’t exist on the world’s ledger in February. However, yesterday at the Fed some functionary sat down at a computer, went into one of the Fed’s POMO accounts and entered the numbers 85, followed by nine 0s. Suddenly, the world had an additional $85bn. It doesn’t exist and then POOF! 11 key strokes later and it exists.
Read more: here