Today it became clear what will be the exact form of the new money-print round of FED. It will be an extension of the old Twist program that is de facto a prolongation of the maturity of the old government debt. This means the Government will repay back less money, i.e. the net quantity of newly added money on markets will increase. This is almost equal to QE programs that are direct purchases of government bonds by FED, using newly printed money. With Twist FED buys long term securities and sells short term ones. As the short term ones will expire sooner, so the final result is that the money that had to be repaid back on short term bonds are de facto not repaid as FED has bought with it long term bonds.

The Twist was implemented instead of QE3 in an attempt to hide from public the fact that FED is pouring new money on markets. As a size with this new $267 billion the program is already bigger than the QE1 and QE2.

It was expected a new stimulus (i.e. money print) to appear. It is not clear if this money will be enough for Obama to stabilize temporary the economy and to win the November elections. May be soon another form of money print will be started as Obama's position is going worse and something must be done. Anyway the clear fact is that new $267 billion of fake and artificially created money will appear in economy literally from nothing. And a new hiding of inflation will have to follow... :)

Dobri
June 20th 2012