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QE 2.0 COUNTDOWN: Goldman Predicts Bernanke Will Begin Massive Asset Purchases In November

According to Goldman Sachs, the Fed will announce the QE v.2.0 program for asset purchases,  a new $1 trillion in U.S. Treasuries, as early as November.  Goldman recently cut their U.S. GDP growth estimate for Q3 and Q4, so this announcement fits their macro view.

That's $1 trillion more of pure, unadulterated national debt monetization.  These are the actions of a desperate Bernanke who fears deflation above all else.

Chris Warren wrote last week that the new QE will fail miserably.  PIMCO's Bill Gross has made a $8 billion bet against deflation, details of which were released today.  And China is showing an increased willingness to threaten Geithner with massive Treasury dumping.



The U.S. Federal Reserve could announce a new program of asset purchases to support a weak economy as early as November, according to Goldman Sachs Group Inc.

“We don’t expect this at the Sept. 21 meeting, but in November or December there’s certainly a possibility that it will be announced,” Jan Hatzius, chief economist at the bank, said Tuesday. He added the Fed is likely to buy U.S. Treasurys worth around $1.0 trillion to kick-start the economy.

To fight the financial crisis in 2008 and 2009, the Fed bought $1.7 trillion in mainly mortgage-backed securities, a move that helped to keep mortgage and other long-term borrowing rates low. That program ended in March. But with the recovery slowing, the Fed said Aug. 10 that it would reinvest the proceeds of mortgage bonds into U.S. Treasurys to prevent its portfolio of securities from shrinking. The question now is whether the central bank will start a new program of asset purchases that would increase the size of its $2.0 trillion balance sheet further.

Goldman Sachs expects this to happen soon given the weakness in the U.S. economy as a result of lower business inventory accumulation and a fading fiscal stimulus. The bank expects the U.S. unemployment rate to creep back up to 10% by early 2011 from 9.6% in August and to stay around that level for most of the year.

U.S. inflation is predicted to continue slowing to 0.5% by the end of next year from around 1.0% currently. That would be well below the Fed’s informal target of between 1.5% and 2.0%.

The upcoming meetings of the Fed’s policy-setting committee this year are Sept. 21, Nov. 2-3 and Dec. 14.









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Reader Comments (10)

You have to hand it to Raymond Wolff for trying.

Described as a financial economist at the SEC, Wolf was asked to come up with an answer to the following existential question of the financial crisis: How much did Citigroup benefit from misleading investors about its true subprime exposure?

Wolff answered the question pretty narrowly, according to a court filing in the SEC’s civil case against Citigroup.

He calculated that Citigroup’s ultimate disclosure that it understated its subprime exposure by $43 billion caused the company’s bond prices to fall 0.65 percentage point more than similar bonds. And the benefit of issuing $19 billion of bonds in the months leading up to that November 2007 disclosure than it would have paid in interest costs had buyers known of the bank’s true finances amounted to as much as $123 million. Alternatively, Wolff concedes, the benefit to the bond prices may have been negligible if you assume that the decline in prices owed to factors other than the disclosure, such as the resignation of CEO Chuck Prince.

The question now is whether the explanation will persuade a federal judge to approve the $75 million settlement of the SEC’s charges against the bank. The SEC alleges that Citi understated its subprime exposure by $43 billion from July to November 2007.

Sep 16, 2010 at 1:32 AM | Registered CommenterDailyBail
We've long believed in the fundamental wisdom of voters, but every so often they make a mistake. An example is Tuesday's decision by Washington, D.C. voters to oust Adrian Fenty, arguably the most successful mayor in the city's history. He lost to City Council President Vincent Gray, who promises to take the district back to the future.

Sep 16, 2010 at 1:34 AM | Registered CommenterDailyBail
Below are the Top 25 schools whose graduates were the top-rated by recruiters.


Interesting list...
Sep 16, 2010 at 1:35 AM | Registered CommenterDailyBail
Glenn Beck, Progressives and Me

The TV host has a point when he says a limitless view of state power is un-American.

Sep 16, 2010 at 1:37 AM | Registered CommenterDailyBail
The question is whether the rise of the tea-party movement—quite conservative and rough around the edges—is scaring moderate voters and making them available, once again, to Democrats. In other words, do Democrats have a renewed shot at moderate voters because of a perception the Republican party is being taken over by tea-party extremists?


The answer is hell no...
Sep 16, 2010 at 1:39 AM | Registered CommenterDailyBail
Pundits, polls and Republican strategists all give conservative upstart Christine O'Donnell little chance of winning a Senate seat in liberal-leaning Delaware.

But others argue it's far too early to write off the newest tea-party favorite, who stunned the political world Tuesday by toppling Republican fixture and nine-term congressman Mike Castle in the party's Delaware Senate primary.

"This one may not be easy, but it's far from over," said Terry Strine, former head of the Delaware Republican Party.

Democrats cheered the O'Donnell upset, saying it all but certainly ensures that the seat, formerly held by Vice President Joe Biden, will remain in Democratic hands. Ms. O'Donnell, the Democrats believe, is too flawed a candidate to win.

Sep 16, 2010 at 1:40 AM | Registered CommenterDailyBail
The Tea Party Movement as originally conceived by Ron Paul has been morphed/hijacked into a parody of itself. Not surprising when you consider the fact that Americans voted for a retard TWICE, then went for a completely unknown scammer with absolutely no track record whatsoever that could justify him being presidential material. Why do Americans do this? BECAUSE THEY THEMSELVES ARE RETARDED.

And THAT is today's American History Lesson.
Sep 16, 2010 at 9:49 PM | Unregistered CommenterRecoverylessRecovery
Your right RLR. The people have been fed a pot of crap, and they bought it. As long as thier show is on TV tonight and thier cell phone is working, they could give a shit what is going on out side thier door. Creidt card still works, its all good with me.

When they wake up, it will be to late. ((( "God Help the Stupid" )))
Sep 16, 2010 at 10:27 PM | Unregistered CommenterTexas Dar
I know I exaggerate and that there are still millions of honest, decent Americans out there. The problem is they're scattered and vastly outnumbered by DOZENS of millions of OTHER Americans who couldn't find their own asses using both and a GPS. Like for example, that mob of several thousand idiots in GA recently camping out overnight and then standing in 100 degree heat (with their children) just in order to get a stupid APPLICATION for Section 8 housing that they could have downloaded online or picked-up at a local HUD office instead. Not to mention the fact that these applications are for Sect. 8 dwellings that aren't even currently available nor will be in the foreseeable future.

Ever see the movie IDIOCRACY?

THAT'S what the U.S. has become. And for basically the same reasons outlined in the movie; idiots vasty out-reproducing the rest of the population.
Sep 17, 2010 at 3:34 AM | Unregistered CommenterRecoverylessRecovery
i do not disagree rlr...idiots do tend to reproduce more than the rest of us...
Sep 19, 2010 at 7:49 AM | Registered CommenterDailyBail

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