Posted on 06/09/2012 9:33:53 AM PDT by whitedog57
The Federal Reserve Board faces a myriad of interesting questions, but the one of most of the world’s mind is … to QE or not to QE. That IS the question.
Chairman Bernanke’s statement to Congress this past week did not say much except that The Fed is standing by in case things get worse.
But I will take a wager that QE3 is coming at the next meeting of the Fed’s Open Market Committee (FOMC). But I am not willing to make a big wager, because there are some sound arguments NOT to do any additional quantitative easing.
So, one can argue that Fed monetary policy has not helped the employment problem (it literally hasn’t changed since June 2010), GDP is still sub-2%, and there isn’t sufficient credit in the system after the great purge of borrowers when the housing bubble deflated. As I pointed out of Fox Business with Lori Rothman on Friday, a recent Fannie Mae MBS (TBA) had a weighted average FICO (Credit Score) of 771 and down payment of 31%.
It appears that The Fed is out of ammo (or any further monetary policy changes will fire blanks). The Taylor Rule indicates that The Fed should raise the Fed Funds rate to 1.25% rather than keeping it at 0.25%.
Bottom line: the facts don’t support the further use of quantitative easing or lowering of interest rates. But political realities may dominate common sense and lead to QE3. (and QE4, QE5, QE6 …).
But don’t expect much other than spikes in the stock market.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
The Left (in Europe and in America) is being pretty consistent in their message —
“Spending less (austerity) is the quickest way to get deeper into debt. On the other hand, if you want to balance your budgets and recapitalize your banks, the best strategy is to spend a lot of money you don’t have.”
They say this sort of thing a lot lately — sometimes I think they really believe it.
If QE3 is done, the only motive would be to (try) to help Obama politically. Bernanke should be fired.
Sorry, I am not up on the millions of acronyms. QE is ???
Quantitative Easing — Keynesian Economics — pump money you don’t have, into a failing economy, in hopes that it creates prosperity.
QE is the government equivalent is opening all your mail and seeing nothing but bills you can’t pay and then taking your credit card up to the liquor store and getting everything you need to get stinking pissed. After you get pissed drunk you then take a weekend trip, go to all the stores that will still honor your credit card and then buy the hell out of that store.
Monday? You sift through the trash for any bottles that may have a teaspoon of booze still left in them. Rinse and Repeat as necessary... that’s Quantitative Easing in a nutshell, FRiend.
Thanks! All I could think was Queen Elizabeth. Too little sleep and no caffeine = too stupid to post. :-)
Do we really have a choice?
Many doomsdaying economist cite QE3 as the beginning of the end.
Certainly everyone though has underestimated the ability of the Central Banks to keep the shell game going.
Then again, there is the history of eventual collapse for all fiat currencies.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.