A Monetary Moment -- Possible Gamesmanship From Cousin Benny

As the debate about whether the Fed is likely to start a QE 3 program and when rolls on, I
note that the US is witnessing a strong period of quantitative tightening which has been underway
since Feb. 2012. Specifically, the Fed has allowed a bit over $100 bil. to roll off its Bank Credit
balance. That represents a strong 3.5% tightening move and brings Fed Bank Credit about $50
bil. brlow where it was at the end of QE 2 (6/30/11). This is the fourth round of liquidity
tightening in evidence since the end of 2008. Each one of these tightening moves has been
followed by a sizable easing move. The Fed needs to buy $50 bil. of Treasuries or other paper
to raise its account value to the level it promised to maintain at the end of QE 2. Moreover, if,
and this remains a big if, the EZ's central banks may need $ over the next several months, the
Fed through its currency swap line could lend up to $200 bil. more without raising eyebrows.

So, there is the potential for QE without the Fed actually having to say They are providing it.
Just a little something to keep in mind.