The day Lehman failed saw the launch of the most epic central bank intervention in history with the Fed guaranteeing and funding trillions worth of suddenly underwater capital. However, what Bernanke realized quickly, is that the “emergency, temporary” loans and backstops that made up the alphabet soup universe of rescue operations had one major flaw: they were “temporary” and “emergency”, and as long as they remained it would be impossible to even attempt pretending that the economy was normalizing, and thus selling the illusion of recovery so needed for a “virtuous cycle” to reappear.
Which is why on November 25, 2008, Bernanke announced something that he had only hinted at for the first time three months prior at that year’s Jackson Hole conference: a plan to monetize $100 billion in GSE obligations and some $500 billion in Agency MBS “over several quarters.” This was the beginning of what is now known as Quantitative Easing: a program which as we have shown bypasses the traditional fractional reserve banking monetary mechanism, and instead provides commercial banks with risk-asset buying power in the form of infinitely fungible reserves.
This program has been so successful in its true intended goal – enriching its benefactors, the banks, who have managed to push the S&P to fresh five year highs (and the Russell 2000 to records) even as the economy has deteriorated to subpar growth not seen in years, in the process replacing a vibrant workforce with a part-time, gerontocratic labor pool, committing the US economy to many more years of subpar growth, that many more years of Fed interventions, a la QE, are assured (not to mention the need to monetize trillions more in US government deficits).
So how does all this look on paper?
We have compiled the data: of the 1519 total days since that fateful Tuesday in November 2008, the Fed has intervened in the stock market for a grand total of 1230 days, or a whopping 81% of the time!…
The article continues, with graphics, at ZeroHedge.