This is the 3rd downgrade by Egan with the big names like Moody's still waiting to catch up.
The above quote from Egan contradicts the supposed intent of this action by the Fed. The Fed says it is to increase hiring. Egan says it REDUCES consumer purchasing power.
Reducing consumer purchasing power means they will purchase LESS, which means manufacturers have fewer orders, which means they need fewer workers.
Can it be true that Obama is secretly -- through the Fed, through ObamaCare, through ending the Bush tax cuts, through promoting higher energy costs, and through pushing for additional tax increases -- following a high unemployment strategy?
Conservatives have been onto that for at least 2 years.
This is a classic liquidity trap and we are also in the middle of a massive deleveraging as well as asset deflation. But commodities are different in that they react to monetary stimulus through inflation. The classic monetary response to deflation (what we have seen in real estate as well as what is seen in the monetary velocity charts) is to add liquidity (first through rate reductions but directly through QE)
As far as Egan, they are considered by the “elite” in the financial world as a bit of a joke (she on Twitter called them the Mr. Pibb of rating agencies) . But they are the ones that are “telling the truth”. Personally I don’t think that QE will have that much impact on input costs but do agree with the downgrade due to the complete lack of leadership on solving the long term financial issues. Obama’s regulations on energy will have a far greater impact on input costs than anything from a monetary policy standpoint.