http://www.reuters.com/article/2012/12/05/us-usa-fed-idUSBRE8B219420121205
By Alister Bull (Reuters) - The Federal Reserve is set to announce a fresh round of Treasury bond purchases when it meets next week, avoiding monetary policy tightening to maintain support for the weak U.S. economy amid uncertainty over the looming year-end "fiscal cliff." Many economists think the U.S. central bank will announce monthly bond purchases of $45 billion after its policy gathering on December 11-12, signaling it will continue to pump money into the U.S. economy during 2013 in a bid to bring down unemployment. "We expect status quo," said Laurence Meyer of the forecasting firm Macroeconomic Advisers. "We expect purchases will continue at the same monthly rate as over the last three months; that the composition will be the same, and that the maturities distribution will be the same." The decision would cement expectations that the Fed will keep buying a combined $85 billion of Treasuries and mortgage-backed bonds a month, while repeating that it expects to hold interest rates near zero until at least mid-2015. The Fed could even decide to announce a larger level of purchases if it wanted to exceed expectations and give the market a bigger jolt to press borrowing costs lower. "If the market expects $45 billion, maybe they should deliver $60 billion ... get markets more excited and really push rates down," said Torsten Slok with Deutsche Bank in New York. U.S. unemployment remains high at 7.9 percent and the economy, while doing better than Europe's, is expected to grow at a meager rate of only around 2 percent next year. OPERATION TWIST The fresh bond purchases will replace a program called Operation Twist, which expires at the end of the year. Under Twist, the Fed bought $45 billion of longer-dated bonds a month with the proceeds from the sale of its shorter-date holdings. Fresh outright purchases would therefore create new money, whereas no new action by the Fed would amount to a tightening in monetary policy as Twist came to an end. Add in monthly $40 billion mortgage-backed bond purchases which it began in September, this would boost the Fed's balance sheet by $1.2 trillion, to $4 trillion, by end-2013 if it keeps buying assets at this pace, as economists expect. "I think it is going to be (maintained) into 2014 because they are not looking for much improvement in the unemployment rate over 2013," said Stephen Oliner, a resident scholar at the American Enterprise Institute. The Fed has promised to maintain its efforts to stimulate growth until it sees a substantial improvement in the outlook for the U.S. labor market. THRESHOLDS However, it has not spelled out exactly what that means and is not likely to use next week's meeting to act on an idea advanced by some senior Fed officials to adopt numerical thresholds for unemployment and inflation to guide policy. These have been floated as a better way to give markets and the public so-called forward guidance on when the Fed will start raising rates, rather than its current calendar date commitment. The idea is to create a tolerance zone within which the Fed would leave rates on hold. But economists think it would prefer not to risk confusing markets by making too many big announcements when it releases its policy decision on Wednesday, expected at 12:30 p.m. ET. The statement will be followed by a news conference with Fed Chairman Ben Bernanke. Analysts also doubt policymakers have had enough time to reach a consensus on measures that amount to a major step forward for the central bank's communication strategy that would influence Fed policy for years to come. "At this point, I'd be a little surprised if they had actually managed to reach agreement about what the quantitative thresholds should be," said David Stockton, senior fellow at the Peterson Institute for International Economics in Washington. Both Bernanke and Vice Chair Janet Yellen have indicated support for the idea, which has been advanced by several of their colleagues. But analysts felt it made more sense to take the step in the early part of next year and concentrate on explaining the decision to increase asset purchases at the news conference next week. Policymakers must also update quarterly economic forecasts despite uncertainty over how much of a drag fiscal policy will exert on growth as Congress and the Obama administration fight over taxes and spending designed to lower the U.S. deficit. Failure to agree on a deal could tip the economy over a so-called fiscal cliff of tax hikes and automatic spending cuts, which many fear could trigger another U.S. recession, and which the Fed has repeatedly said it would not be able to offset. http://www.bloomberg.com/news/2012-11-28/copper-shortage-seen-extending-as-china-accelerates-commodities.html
Copper Shortage Seen Extending as China Accelerates: Commodities By Glenys Sim - Nov 29, 2012 2:35 PM ET Copper supply shortages will extend into the first half of next year as an accelerating Chinese economy more than doubles the pace of growth in global consumption even as mines extract a record amount of metal. Demand will outpace supply by 316,000 metric tons in the first six months, more than all copper in London Metal Exchange warehouses, before a surplus emerges in the second half, Barclays Plc estimates. Production has lagged behind consumption since 2010, according to the International Copper Study Group. The metal may average $8,300 a ton in the second quarter, 5.1 percent more than now and the most in a year, according to the median of 21 analyst and trader estimates compiled by Bloomberg. China, which uses 41 percent of the world’s copper, is rebounding from seven quarters of slowing growth after the government approved a $161 billion subways-to-roads construction plan in September. It’s being joined by central banks from the U.S. to Europe to Japan, who also pledged more stimulus. Housing starts in the U.S., the second-largest consumer, reached a four- year high last month and business confidence unexpectedly strengthened in Germany, Europe’s biggest economy. “U.S. growth will be moderate and Europe is stabilizing, so that drag might reverse partially, and then it all falls back to China,” said Dominic Schnider, Singapore-based global head of non-traditional assets at UBS AG’s wealth-management unit. “Economic activity doesn’t have to be that strong in China for inventories to get drawn down and you could see a rally in the first half, but then you come into the second half where mine supply comes in on the strong side.” Quarter Century Copper rose 3.9 percent to $7,899.50 a ton this year on the LME, the world’s largest metals bourse, as the LMEX gauge of six industrial metals gained 3.6 percent. The Standard & Poor’s GSCI gauge of 24 commodities added 0.6 percent, and the MSCI All- Country World Index (MXWD) of equities jumped 11 percent. Treasuries returned 2.7 percent, a Bank of America Corp. index shows. The metal averaged $7,949.43 since the start of January, headed for the second-highest level in a quarter century after last year’s record $8,825.98. Freeport-McMoRan Copper & Gold Inc. (FCX), the biggest publicly traded producer, may report a 44 percent gain in net income next year, according to the mean of 11 analyst estimates compiled by Bloomberg. Shares of the Phoenix-based company will advance 28 percent in the next 12 months, the average of 21 predictions shows. Global Shortfall Global demand will expand 3.4 percent to 20.85 million tons next year, from a 1.5 percent gain in 2012, Barclays estimates. Supply will climb 3.5 percent to an all-time high of 20.83 million tons. While that means an annual shortage of 19,000 tons, it’s driven by the projected first-half deficit, compared with a surplus of 297,000 tons in the second six months. China’s copper demand may rise 5.5 percent to 8.1 million tons, from a gain of 4.8 percent this year, according to Beijing Antaike Information Development Co., which has researched metals for two decades. The infrastructure plans approved in September include about 2,000 kilometers (1,250 miles) of roads, subway projects in 18 cities and extra spending on railways. The nation’s economy will rebound this quarter from the slowest pace in three years, and keep accelerating through at least the middle of 2013, according to the medians of as many as 37 economist estimates compiled by Bloomberg. That may not be enough to offset contractions elsewhere. European Recession The 17-nation euro-area tumbled back into recession last quarter and economists surveyed by Bloomberg expect Japan to do the same this quarter. Europe accounts for 18 percent of copper demand and Japan 5 percent. U.S. leaders have yet to resolve the so-called fiscal cliff of automatic taxes rises and spending cuts, which the Congressional Budget Office has warned risks shrinking the economy. The International Monetary Fund cut its forecast for global growth in 2013 twice since July. Hedge funds and other speculators are betting on lower prices, U.S. Commodity Futures Trading Commission data show. They held a net-short 2,649 futures and options in the week to Nov. 20, after turning negative the week before for the first time since August. While stockpiles monitored by the LME fell 33 percent to 249,975 tons this year, those in bonded warehouses in China reached a record 700,000 tons, Goldman Sachs Group Inc. said in a Nov. 8 report. Those tracked by the Shanghai Futures Exchange, which are separate from the bonded-warehouse figure, have more than doubled to 205,933 tons, bourse data show. ‘Keep Up’ “The improvement in demand will probably be capped out by the ability of supply to keep up,” said Andrew Shaw, the head of industrial-metal and bulk commodity research at Credit Suisse Group AG in Singapore. “We’re probably past the trough but it’s not very convincing.” Codelco, the largest producer, cut the premium it charges on top of the LME cash price on sales to Chinese buyers by 11 percent to $98 a ton for 2013, according to two people familiar with the talks. That compares with a 5.6 percent drop to $85 for European buyers and an 8.6 percent reduction to $85 for Japan and South Korea. Lower fees usually signal higher supply. Chinese inventories may start contracting as the economy strengthens. Exports rose in October at the fastest pace in five months and a preliminary reading of HSBC Holdings Plc and Markit Economics’ purchasing managers’ index for November signaled the first expansion in 13 months. ‘More Positive’ “Next year will be slightly more positive than this year,” Jeremy Goldwyn, director at Sucden Financial Ltd., said in an interview on Bloomberg Television from Shanghai today. “That’s predominantly based on improvement in Chinese conditions, marginally better in the U.S. and pretty much the same in Europe,” said Goldwyn, who’s worked in the industry for more than 25 years. Expectations for next year’s global supply are probably too optimistic, Macquarie Group Ltd. said in a report Nov. 6, citing constraints including power shortages in the Democratic Republic of Congo. The bank anticipates production growth of 4 percent next year and a “significant copper surplus remains unlikely.” The mining industry is contending with rising costs from labor to energy and is extracting about 19 percent less metal from every ton of rock that it was in 2000, according to Macquarie. Codelco, based in Santiago, reported a 5 percent drop in nine-month production on Nov. 22 because of declining ore grades at its Chilean mines. Freeport will report net income of $4.52 billion in 2013, from $3.14 billion in 2012, according to analyst estimates. Its shares rose 6.6 percent to $39.22 this year and will reach $50.05 in 12 months, the predictions show. Copper accounted for 78 percent of sales last year, data compiled by Bloomberg show. “We’re still relatively positive on copper with China’s economy recovering, and the U.S. as well,” said Nick Trevethan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Singapore. “Europe’s pretty much written off, but the China story’s becoming more and more about China and less and less about the rest of the world.” http://silverunderground.com/2012/11/federal-reserve-officials-admit-qe3-wont-work/
Ben Bernanke is set to speak tomorrow about the Federal Reserve’s future plans. Recently, the private central banking cartel decided to initiate a third round of quantitative easing in response to a recent jobs report, believing falsely that inflation will somehow help stimulate job growth. Also, rather than just buying a set amount of Treasury bonds in one burst, the Fed opted to begin purchasing them in an ongoing manner, leading some to refer to this third round of quantitative easing as QE-infinity. However, as Ben Bernanke considers QE4, some of the Federal Reserve’s own officials are speaking out against his wild monetary policy. Consumer prices have risen sharply over the past few months, especially in food and housing. Despite ultra-low interest rates, investors still remain on the sidelines, worried about the potential costs of new regulations. Let’s consider the arguments put forth by those dissenting Federal Reserve officials who fear Bernanke’s reckless inflationary policies. Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, Warns of Inflation Risks Bloomberg is reporting that Richmond Fed President Jeffrey Lacker publicly opposes any future efforts to continue the Federal Reserve’s bond-buying program, dubbed quantitative easing. “We cannot continually buy more securities and create more bank reserves without jeopardizing our inflation goal,” Lacker warned in a recent talk in West Virginia. Bernanke, meanwhile, sees inflation as the goal of the policy, putting the interests of debt-saddled consumers over the needs of those who save or live off of fixed incomes. Jeffrey Lacker also spoke out against the previous round of quantitative easing, similarly citing rising inflation as his rationale for opposing the move. Lacker has been a frequent critic of Federal Reserve policy throughout 2012 and has remained in opposition to all of the decisions made by the Federal Open Market Committee since it started down this inflationary course. Dallas Federal Reserve President Admits Reservations About QE3 Jeffrey Lacker is not the only Fed president worried about worsening inflation. The Wall Street Journal published comments by Dallas Federal Reserve President Richard Fisher, who expressed his skepticism about the effectiveness of quantitative easing. Fisher feels, like many fiscal conservatives, that the Fed’s policy is encouraging wasteful government spending. As the government spends more money, buying power is extracted from the private economy, thus impeding job creation. Said Fisher of the policy, “What we’re accommodating is fiscal malfeasance and at some point it has to stop.” He also explained that recent economic data does not suggest that the policy will result in serious growth, and that investors from the business community do not believe that the easing techniques will work. With Congress careening towards a fiscal cliff, Fisher feels that the Federal Reserve is providing an incentive for elected officials to metaphorically step on the gas. Five years after the Greenspan-caused crash that started this whole mess, the economy continues to suffer. Since that time, the Federal Reserve has rolled out a series of arcane, useless policies which have done little to encourage growth or business investment. Meanwhile, consumer prices continue to rise, forcing low income families and senior citizens into an untenable situation. Visit http://www.SilverCircleMovie.com to discover more about our forthcoming 3D animated film. Also, the Silver Circle graphic novel is available now at the following hyperlinks in full color and black and white. Buy physical Copper, Silver, and Gold to protect yourself from the coming collapse of the dollar! Buy some Copper Bullion from The Penny Fund to protect the purchasing power of your wealth! TIME IS RUNNING OUT! Click on the top or side bars to start buying something that you can hold, own, and protect! Do not trust stocks, bonds, etfs, etc.! |
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