That’s the big headline in today’s WSJ and that’s why we’re up 500 points in 2 days on the Dow. Bernanke is speaking at 1pm this afternoon and the Journal is already predicting BIG THINGS coming out of the Fed’s Sept 20-21 meeting. Being treated as a given already is "Operation Twist" (see this week’s Stock World Weekly for a full explanation), which is what is sending long bond rates to record lows as, IN THEORY, the Fed is going to swap that $1.5Tn in blue and purple notes (left chart) into $1.5Tn worth of red notes.
Sure this seems, on the surface, to be insane as the Fed will be taking all that stupid, inflation-denying paper off bondholder’s hands (ie. Banksters and the top 1%) and handing them cash with which they will be able to drive up the price of short-term paper so that people and small businesses, who tend to get loans that are less than 10 years – would effectively be priced out of the market. So Ben is crazy like a fox – as this is the perfect vehicle to serve his Corporate masters and screw over the American people by saddling them (through Fed purchases) with Trillions of Dollars worth of underperforming bonds for decades while inflation chews up the redemption value and Big Business crushes what little is left of their competition. BRILLIANT!
Even more so as Banksters will be able to borrow at long-term rates and lend at short-term rates, increasing their interest crack spread 2-3 times. Never before have so many been screwed by so few so hard…
So, in QE2, the Fed lent out $600Bn over 6 months and if their favored IBanks simply bought 10-year notes with the money, they’d be up $120Bn already – isn’t that special? Now the Fed "twists" their program and buys back the 10-year notes at the new, higher prices, giving the Banksters now $720Bn back which they can then lend out for a spread to their longer borrowing costs. This is why we like XLF long-term – how can they lose?
Obviously, this is not going to create any jobs or stabilize the economy, other than the economy of the Bankers and,…
