Some Monetary Policy Issues

Power Of Talk
QE 3? Well, it has not started yet. This week the Fed allowed another $11 bil. to run off
Fed Bank Credit, bringing the total run off in FBC to $135 bil. since last Dec. It is amusing
that there are financial writers out there talking about how QE 3 is already affecting things
when there has not been any. The Fed is supposed to start up soon. It will take nearly four
months of the new program to bring FBC up to its prior peak.

Benny's Final Lap Around The Track?
The Mittster has made it quite clear that Bernanke is toast if he wins the election. It is the
least he can do for the super - right GOP guys who he threw under the bus in last night's
debate. Wall Street would not like it if Benny was cut loose, so the Mittster will hear
about it soon. If Romney is elected, it would be amusing if Benny said "Screw it, I don't
want to work for a guy who has threatened to lift my chairmanship." Whatever a Romney
presidency may create, assuredly it will create confusion.

Prime Funding Source Still Depressed
The Fed normally talks monetary policy in the context of the economy, employment and the
inflation rate. I have a far more "green eyeshade" view and regard the collapse of the market
for commercial paper as a primary reason the Fed has had to add mucho liquidity to the financial
system to keep it afloat. Comm'l Paper Outstanding (You should know that over $300 bil. of
such paper which was outstanding in 2008 was "disappeared" by the Fed through revision.)