Post Tagged with: "quantitative easing"
The Fed Resumes “Printing”
One conclusion from the Fed’s actions is that it doesn’t care as much about its inflation target as it does about improving the unemployment rate. Thus, it will err on the side of letting inflation rise, if it would improve unemployment. But holding rates too low too long fueled the housing bubble. Repeating the same game will have consequences of malinvestment in the form of new bubbles in the economy. The Fed hopes to restore employment before the negative consequences of loose monetary policy show up
[PREMIUM] The Ultimate QE is the Fed’s Coming Purchase of Real Assets
I would bet on near-systemic collapse before the Fed starts either asset purchases or Congress resorts to fiscal activism. But eventually, the Fed is going to purchase more than just treasuries. They will purchase a lot of financial assets and probably some real assets as well
[PREMIUM] The Fed’s Rate easing and Obama’s Mortgage refi plan are bullish
Investors must still be worried about the fallout from the European meltdown. However, the situation in the US is looking much better than it did last week because of this aggressive policy response
Chart of the Day: Gold reacts to FOMC rate easing
The Fed has come out 9-1 in favor of rate easing i.e. capping medium-term treasury rates. The interesting bit is that while the Fed did the exact same thing in August out to two years, this announcement takes permanent zero out to nearly three years. That’s rate easing. Some people call it financial repression. And it’s gold bullish
Chart of the Day: Is Gold About to Get a Monetary Blast (Off)?
Watch gold as it pushes up against the downtrend line. Any hints from the Fed of QE3 could send it “to the Moon, Alice!” The Fed rejoining the party and the LTRO2 coming next month could be an explosive mix
The ECB is Engaging in Massive QE
Despite the ongoing hawkish rhetoric from the ECB, there are signs that they are getting it: The LTRO can’t work, as you’re essentially just swapping one liability for another one (albeit more long term in duration, therefore making it better for the banks). But note the way the ECB balance sheet is expanding: The consolidated assets of the European system of Central Banks is now 4.4 billion euros or $5.7 billion. In effect, the consolidated ESCB balance sheet is almost two times that of the Fed and its increase over the last 6 months is almost equal to the entire increase in the Fed’s balance sheet over the last several years. Bottom line: the system of European Central Banks (ESCB) has been engaged in massive QE and much more is in the pipeline. With such massive injections of “liquidity” into the European banks, a European Lehman type failure with Lehman’s systemic consequences becomes ever less likely
PIMCO’s El-Erian: QE3 won’t produce the outcomes we want
Bloomberg wrote the following paragraphs about a recent interview with Mohamed El-Erian. What i thought was interesting was his belief that the Fed is out of bullets. Monetarists and Keynesians believe the Fed can still be effective by managing expectations. So the Fed is on a mission to improve its communication of interest rate policy. Like El-Erian, I am sceptical of this policy turn, but what else can the Fed do? They say they have lots of tools left. Do they
What has the Fed done to avoid the US becoming the next Japan?
Imagine being on the FOMC and in the mainstream paradigm. In 2008 you moved quickly to make sure the US would not become the next Japan. What do you have to show for it, 3 years later
ECB/Fed Support for the European Banking System – 750 billion USD, and counting …
It is my view that the ECB is now the only thing between the economy and widespread bank failures, but I also concur that the consequence of this is a permanent outsourcing of the interbank market in Europe to the ECB’s balance sheet and, quite possibly, Fed’s USD swap lines
Chart of the Day: The ECB Balance Sheet
Who says the ECB can’t keep up with the Fed. As the euro crisis has caused liquidity for euro zone banks to dry up, the ECB has taken on the intermediation role. In essence, they have taken on the dollar liquidity function that the US money markets used to provide via its bank liquidity operations and currency swaps with the Fed
Forecasting misconceptions and the likelihood of European financial repression
Market participants, including economists and strategists are prone to confusing what they believe should be the case with what will be the case
PIMCO’s Mohamed El-Erian: US recession odds are 50%
Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian told Bloomberg TV’s Betty Liu and Dominic Chu this morning that U.S. economic conditions are “terrifying” as the nation struggles to recover from recession. El-Erian also said the odds of the U.S. returning to recession are as high as 50%