Era of 'jobs-targeting' begins as Fed launches QE3

The Telegraph ^ | 9/13/2012 | Ambrose Evans-Pritchard

[bruinbirdman]

Quantitative Easing has become banal, a fine-tuning tool like any other. It is by now drained of all drama. Even the Federal Reserve’s hawks have lost the will to resist. Five of the six critics acquiesced.

The Fed will buy a further $40bn (£25bn) of mortgage bonds each month until the jobs market improves “substantially”, and more if need be. It is open-ended. Zero interest rates will continue until mid-2015.

It is pocket-sized compared with the pace of $75bn a month in the QE heyday, or the 500 basis point rate cuts at the onset of the Great Recession. This is calibrated, not full-throttle.

Fed chairman Ben Bernanke no longer faces a banking collapse, or an imminent spiral into debt deflation. He has launched QE3 at a time when credit is expanding, M3 money is growing at 5pc, and core inflation is above 2pc. This is QE by choice. The extra juice is insurance against a clutch of nasty risks ahead: a Chinese hard-landing, deepening slump in Europe, and the looming “fiscal cliff” in the US – net tightening of 4pc of GDP if Congress lets it happen.

This is well-advised. The manufacturing ISM index in August flashed contraction. New orders were awful. The economy is close to a tipping point, and that matters for the whole world.

A study by Nathan Sheets at Barclays Capital found that once US growth drops below 1.5pc on “a rolling four-quarter basis”, it then falls by nearly 3pc over the next year. “We find that the spillovers are much larger as the US economy cuts through its stall speed, with the sensitivity of foreign growth roughly twice as large as at other times,” he said.

Yet Mr Bernanke’s main eye is on America’s intractable jobs blight – “a grave concern, not only because

[bruinbirdman]

[Tublecane]

I don ‘t get it. I could swear we already had QE3, like two years ago. Are they double counting?

[bruinbirdman]

With the federal budget on automatic plus 20% every year, it is about QE 9

yitbos

[dalebert]

Ok..now they are going to kill more jobs like the killed the fish market.

[fhayek]

What kills me, what really makes me hate the media, is when I heard the report on this (CBS radio, during Rush), they talked about the actions the Fed is going to take. And then I waited to hear the potential down side to this. The risks. The pitfalls. But I heard none. It is as if these actions only have positive effects. Lower interest rates. More economic activity. Now, I am no genius, but it occurs to me that if these policies only have positive outcomes, then we should be doing this ALL THE TIME. But as grandma was fond of saying, there is no free lunch.

Republican policies are 'schemes' or 'fraught with risk'. Democrat policies, seemingly are without risk. Or so the media would have us believe. Anyone with half a brain knows that this is bull spit.

[BfloGuy]

The Fed will buy a further $40bn (£25bn) of mortgage bonds each month until the jobs market improves

Translated:

The beatings will continue until morale improves.