In today’s address, Bernanke was asked why the Fed has not pursued using QE3 or other monetary tools to increase the recovery rate and the rate at which unemployment is declining. Bernanke’s response was that inflation was on target and the use of monetary tools would be risky and unwise for only minimal changes in growth. Will we ever see QE3? Should we?
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They're going to have to print at some point. Just watch the cross rates, EUR/USD @1.28 = Ctrl + P
lol wut
EURUSD at 1.28 or whatever arbitrary # would certainly not signify a green light for helicopter ben. I agree with your general promise that printing is coming however.
It's called the exchange rate and it's not exactly an arbitrary number. Inform yourself:
EURUSD at 1.28 or whatever arbitrary # would certainly not signify a green light for helicopter ben. I agree with your general promise that printing is coming however.[/quote]
Completely agree. But when will happen? Being an election year, also where fiscal policy for debt reduction is highly likely to be a focal point, is it possible to see printing this year or the next? Fiscle policy will have to be considered somewhat. So if the Fed waits until mid to late 2013, does that affect the effectiveness of the printing when they currently forecast each years growth rate to increase?
Tell me more, i already lost you at exchange rate, and especially how you got that nice, almost round, number of 1.28.
liike whoa
Agree with Skilling, they will whip out QE3 at first sign of real slowdown. They are just using it as bait now so debt fears dont overcome market.
QE has almost nothing to do with the stock market and everything to do with weakening the dollar. Long story short, when global growth significantly slows like it has since 07, countries pursue beggar thy neighbor strategies (http://en.wikipedia.org/wiki/Beggar_thy_neighbour) to steal growth from trading partners (Other countries). Think of the GDP forumula: GDP = C + I + G + NX. The first 3 are dead and are not coming back, so the only way to grow in this environment is to increase net exports. How do you increase NX? Kill your currency. The Fed, the Obama administration, and the Treasury are all uniformly pushing for a weaker dollar. It essentially puts our products on sale to the rest of the world at the expense of our trading partners. QE/QE2 was designed to break the currency peg in China and it eventually did. The reason we didn't see 10% inflation in the US was that China absorbed all the inflation for us. The PBOC had to print just as many Yuan as we printed dollars and China ended up soaking up all the inflation. As a result, they had to end the peg and let the Yuan trade higher to curb inflation. Now, they're having a soft landing and inflation is in check. They are moving back towards a soft peg and when that happens, Big Ben will just fire up the presses yet again.
If you ever wondered why the Euro has held up so well after literally 99.99% of analysts had it collapsing over the summer of 2011, just understand that it is in both the US's and China's best interest to maintain a strong Euro. Also, the default of one country has no impact on the viability of a currency just as if Wal Mart were to default tomorrow no one would call for a dollar crisis. The fact is the Euro will get stronger, move toward 1.40 most likely, and add members.
On top of slowed global growth, we have the largest peacetime accumulation of debt in the history of the world and the US is the worst offender. On balance sheet debt is $16 Trillion but when you include contingent liabilities (Fannie Mae, Freddie Mac, Sallie Mae, FHLB, FHA, etc) it comes out to around $80 Trillion - $110 Trillion. That debt will obviously never be repaid through any viable combination of growth and taxes (Even if we get the growth increased taxes reverses the cycle, if you have a background in linear programming it's clear you can't get there). So growth won't do it, and the other 2 options are default or inflate. Default is unthinkable, so the only choice is to inflate. Thus, QE, QE2, Twist, ZIRP, and the eventual QEX.
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