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Dave Kranzler: Is the Fed back to 'quantitative easing'?
By Dave Kranzler
Investment Research Dynamics, Denver
Thursday, February 15, 2018
The Federal Reserve added $11 billion to its System Open Market Account account for the week ending yesterday. It purchased $11 billion in mortgage securities directly from banks.
This injects $11 billion into the banking system. Cash is "high-powered" money -- it can be leveraged 10 times (banks need to hold 10 percent in reserves against "high-powered" money. Eleven billion dollars is $110 billion of leverage for the banks to use for activities such as propping up the stock market.
This certainly explains why there appears to be another "V" recovery in the stock market after a near-10-percent drawdown in the Dow and the SPX. This is very similar to the 10-percent market plunges in August 2015 and January 2016, both of which were followed with highly unusual "V" recoveries. ...
... For the remainder of the report:
http://investmentresearchdynamics.com/is-the-fed-back-to-quantitative-ea...
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