Jim Sinclair’s Commentary

Do you still doubt the Fed will fail to meet all the needs to develop as the economy rolls over to a new low?

QE is going to infinity!

Fed to Buy Government Debt; Says the Recovery Has ‘Slowed’
August 10, 2010, 2:19 pm

Acknowledging that the recovery has slowed, the Federal Reserve announced Tuesday that it would use the proceeds from its huge mortgage-bond portfolio to buy long-term Treasury securities, The New York Times’s Sewell Chan reports from Washington.

By buying government debt, the Fed is taking an unmistakable step to maintain the large amount of money that it pumped into the economy, starting in 2007, to prop up the financial and housing markets.

The Fed bought $1.25 trillion in mortgage-backed securities, and another $200 billion in debts owed by government-sponsored enterprises, primarily Fannie Mae and Freddie Mac, and completed the purchases in March. The Fed had planned to allow the size of that portfolio to shrink gradually over time as the debts matured or were prepaid. Instead, the Fed will reinvest the principal payments in longer-term Treasury securities.

The central bank said it would continue to roll over its holdings of other Treasury securities as they mature.

In its announcement, the Fed also left unchanged its benchmark short-term interest rate — the federal funds rate, the rate at which banks borrow from each other overnight — at zero to 0.25 percent, the level it has been at since December 2008.

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Jim Sinclair’s Commentary

Every program requires financing. QE is the means.

As the economy weakens you can anticipate programs increasing to an infinite number. To finance these programs, broken states, unemployment and entitlement, the only means is QE to infinity.

Gov’t likely to keep big mortgage market role
By ALAN ZIBEL (AP) – 15 hours ago

WASHINGTON — Keeping Fannie Mae and Freddie Mac in business will cost taxpayers billions. But getting the federal government out of the mortgage business would cost home buyers dearly, in the form of higher interest rates.

The Obama administration will begin tackling this dilemma next Tuesday at a public conference on the future of the mortgage system. Fannie and Freddie lost a combined $9 billion in the April-to-June quarter and have needed more than $148 billion to stay afloat since the government rescued them nearly two years ago.

Figuring out what to do with Fannie and Freddie could take years and involves a more difficult question: How much should the government do to subsidize the housing market?

The government has helped make mortgages attractive to Americans for decades with a range of policies, from allowing homeowners to deduct mortgage interest payments to backing loans that make long-term fixed-rate mortgages widely available.

Now, Fannie and Freddie are facing scrutiny for the billions that taxpayers have covered for the bad loans made during the housing boom. And the administration and Congress are under pressure to address Fannie and Freddie’s role that contributed to the mortgage crisis after leaving that out of the broader financial regulatory overhaul.

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