QE3 IN THE WORKS~!@#$%^&*(!#@$%^&*()_@#$%^&*()
Federal Reserve Chairman Ben Bernanke told Congress Wednesday that a new stimulus program is in the works that will entail additional asset purchases, the clearest indication yet that the central bank is contemplating another round of monetary easing.
Bernanke said in prepared remarks that the economy is growing more slowly than expected, and should that continue the central bank stands at the ready with more accommodative measures.
"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," he said
"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate."
Markets reacted immediately to the remarks, sending the Dow industrials up about 70 points in a matter of minutes. Gold prices continued so surge past record levels, while Treasury yields moved higher as well.
The Fed recently completed the second leg of its quantitative easing program, buying $600 billion worth of Treasurys in an effort to boost liquidity and get investors to purchase riskier assets.
While stocks rose about 6 percent through the course of the program, nicknamed QE2, economic progress has remained elusive.
RELATED LINKS
Fed Weighed More Stimulus—As Well as an Exit StrategyFed to Keep Rates Low for a 'Long, Long Time': GrossEconomists Finally Admit: We're Clueless About Jobs, Too
U.S. gross domestic product grew just 1.9 percent in the first three months of the year, and the second quarter does not appear to have been much better. For 2011 as a whole, the Fed sees U.S. GDP expanding 2.7 percent to 2.9 percent, down from forecasts in a range of 3.1 percent to 3.3 percent back in April.
Unemployment has taken a turn higher as well, with the economy creating just 18,000 jobs in June and the jobless rate edging higher to 9.2 percent.
Minutes to the central bank's June meeting on Tuesday suggested that, while some members were pondering the possible need for additional easing amid a weak economy, the Fed is not yet ready to take any further action.
But the minutes also reflected divisions within the central bank over further easing, and Bernanke's speech provided a further indicator that a QE3 move is far from off the table.
"Even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further," Bernanke said.
Among the options he outlined: "More explicit guidance" regarding how long rates and the size of the Fed's $2.6 trillion balance sheet will remain at current levels; more securities purchases to increase the average maturity; and cutting the interest paid to banks on reserves at the Fed, a move that would encourage the institutions to put more money to work.
"Of course, our experience with these policies remains relatively limited, and employing them would entail potential risks and costs," he said. "However, prudent planning requires that we evaluate the efficacy of these and other potential alternatives for deploying additional stimulus if conditions warrant."
© 2011 CNBC.com
Written by Jeff Cox @ cnbc
This isn't funny blastoise... ~!@#$%^&(!#@$%^&()_@#$%^&*() indeed.
So, let's keep doing what hasn't worked...
God I wish I could reach through the tv and punch that stupid fuck right in the face.
Lets say this actually goes through how high will gold get maybe 30% move?
Now, lets factor in QE3 BUT the debt ceiling isn't raised! Will the two result in a wash or what? Obviously there will be movement but in what direction?
At this point, I think Ben just wants to be remembered in history.
and you guys didnt see this coming? There will be QE infinity because the only tool the Fed has is to print money.
As I have said for years its going to be a horrible decade to be a bond manager. Also interest rates wont be rising for 5 to 10 years.
You guys can say what you want...........................
"It is the nature of the human species to reject what is true but unpleasant and to embrace what is obviously false but comforting"
meanwhile in China, they tear down brand new 11 story buildings just to build 102 story buildings!! Why? Well because they can and t give the people something to do!!!
http://www.zerohedge.com/article/guest-post-chongqing-largest-construct…
[quote=ProdigyOfZen]and you guys didnt see this coming? There will be QE infinity because the only tool the Fed has is to print money.
As I have said for years its going to be a horrible decade to be a bond manager. Also interest rates wont be rising for 5 to 10 years.
You guys can say what you want...........................
"It is the nature of the human species to reject what is true but unpleasant and to embrace what is obviously false but comforting"
meanwhile in China, they tear down brand new 11 story buildings just to build 102 story buildings!! Why? Well because they can and t give the people something to do!!!
http://www.zerohedge.com/article/guest-post-chongqing-largest-construct…]
Interesting point on being a bond manager in the next ten years. Can you explain why you think so?
Well think about? The last two years you had to buy debt at extremely low yields after the run up from the bottom. You are stuck with 2.3.4..5 % yield and getting nothing on treasuries. I dont see interest rates rising in the next 5 to 10 years and even if they do they wont by much, say .50 bp? maybe even a point before the economy collapses again.
The Fed has stuck you in a corner with no where to run. Unfortunately I dont think they can raise rates and with unofficial inflation currently at 8% the low yields on bonds do not cut it. They wont be able to raise rates when inflation really takes off, another hammer on bond managers because they cant chase the yield that they normaly would be able to when rates rise.
Its something like 60 to 80% of the CPI is housing related. Well shoot of course it is "low" since housing as been depressed for years now.
"Please, doc, I need another hit!"
"Alright, but just this once..."
Destruction.
"I'M PRINTING MONEY, WHEEEEEEEEEE!!!!!!" - the bernank
what a fucking terrible article.....go figure by the idiot reporters at biased cnbc.
anyways, can we all say japan together? usa is in a lose lose situation. get out as fast as you can.
I'm relatively new at macrofinance theory, but could somebody please explain to me what doesn't work about this (as opposed to any other option)? I'm not trying to start an arguement, just curious. I was under that this was a bond buyback program and that even though it f*s our debt, inflation, etc. that it is good for revenue and increases domestic exports. Does this form of policy fall under Monetary policy or Kenysian theory?
And just another question, since everyone here seems to hate QEs, what do you all think would be a better policy? Thanks
hum, I will nibble a little bit on the bait.
I would say Modern Monetary Theory is Keynesian economic theory. I mean according to MMT the FED does not print money.
The better policy would have been to let all those firms go bankrupt in the first place, spend 2 years in horrible conditions but then by now be growing again. This is of course political suicide and no one has the will to do it.
The government will do the right thing after all the other wrong avenues are exhausted becuase they will be forced to. They should not implement QE3, work on paying off the debt, lower government spending, cut govnt jobs, bring a lot of troops home etc. Resist the temptation to bail out municipalities when they start going bankrupt, not bail anyone else out including private corporations etc.
The one that is a real slippery slope is bringing a lot of our troops home because the US is basically the worlds policeman and it really depends on how the other strong military nations think about this action. Will they step in to fill the void or try to take over disputed land or new land etc?
Again, not trying to argue, however I thought Keynsian theory was government spending directly into the economy (govmn't programs, infrastructure, etc) socialism if you will; and MT was government giving money into the banking system to increase lending (which hasn't happened and is one of the flaws of MT). I am a little socialist and think govnm't spending is good at the moment, but that they should reduce debt through like you said bringing troops home, and also boosting revenue (nobody likes it, but tax hikes). and also cutting bush's tax cuts for the upper classes. I do understand your point of view about the nationalization of our banks and bailing out, but also who knows that sort of shitstorm would've happened if they weren't taken care of. please correct me if I'm you think I'm wrong about my fiscal theories. Thanks again guys
I was under the impression that, increasing gov't spending is a good thing during a recession/depression to get the economy going. Then lower spending and increase taxes.
What jobd will us mikitary men though that us the qurstion there isn't a lot of jobs as is :/
Politicians / Officials are all acting like retards, in the US and even more in Europe those days.
The just keep the dream going. The later they wake up and face the reality and the harder it will be when they wakeup.
I do think you are wrong but don't feel like arguing forever about it.
What would happen if they let everyone go bankrupt that should have? Well the same thing that happened before 1913 and the FED. That is part of capitalism and companies/people are supposed to go bankrupt. That is the way the system works, from destruction we have creation.
I don't think you realize that government spending just takes money from the private economy and so do tax hikes. There should be a flat 15% tax rate nationwide both for personal and for business. This will put A LOT of accountants out of work but who cares there are too many as there is, as well as lawyers. Then people would not hire all these guys to move their money off shore or the other million ways to get around taxes etc.
You are discounting the fact that finance is the most globalized industry in the world right now..this was not the case in 1913.
that is simply not true. If Finance was not a global industry then the depression would not have affected the world. Most people don't realize how globalized the world has been for a very long time. And besides commodity trading has been the worlds most globalized industry for just about ever now.
Government spending doesn't take money from the private economy, taxes do. Government spending actually injects money back into the private economy for the most part.
Yes and you can continue to listen to the bunk economics of the last 50 years.
Where do you suspect that "money" comes from? Most people would say out of thin air, sure it does. Every dollar they print is a dollar of debt owed.
One day people will wake up.
Who are you kidding? Government spending is funded by revenues (taxes) and borrowing (debt). While taxes take money out of the private economy, much of government spending injects that money back into the private economy. As far as debt goes, that's an investment the private sector has decided is the most judicious to make. If people felt there were a better risk/return opportunity elsewhere, that's where the market would go.
This is basic GDP = C+G+I+Ex-Im, not some "bunk economics of the last 50 years."
Some gold trader answer my question!!!!
So suppose Moody's downgrades the U.S.'s debt from AAA due to QE3 + other woes. What immediate effect would that have on the the markets?
I find it absolutely, fucking falling out of my seat hilarious how the US is still AAA, but if they don't vote to take on MORE debt besides the current debt which they cant even pay, before aug 2 they go automatically to a D!!!!!!. They have been tapping into government employees retirement funds(disinvesting for the past 2 months).Woweee. Something is not right there. Why are they still at AAA? An economic system rife with nepotist collusion...and the emperor will soon have no clothes.
50bps over the next 5 to 10 years? That's not entirely impossible but that would be a horrible decade for positively everyone, not just bond managers. The kind of slack in the job market you would need to keep inflation that low for 10 years is awful.
aka Japan the last 20 years.
I dont think they will be able to do it. Either there is going to be a hyperinflationary default and currency crises (which is where I think we are heading) or there will be stagnant growth like Japan for a very very long time.
I just don't think you can have a depression with a fiat money system. We are on the downside of a 30 to 40 year credit bubble expansion and now collapse.
In 2006 it took 6 dollars of new printed money (aka debt) to equal 1 dollar of gdp. This is called the marginal productivity of debt and it is seldom discussed.
"In its effort to counter the significant economic difficulties since 2008, the US government has added, or will have added, around $4 trillion in deficits (financed by new debt) in its three fiscal years 2009, 2010 and 2011. Yet, all this massive government deficit spending has failed to really ignite economic growth. Most likely this is because of the enormous dead weight of unproductive and onerous private sector debt, particularly that of consumer debt. Hence, real US GDP will have increased probably less than $1.5trn during these years. Including some further economic benefit in the years thereafter, a total GDP benefit of only about $2trn is probable.
So, $4trn borrowed for $2trn in GDP gains. Thus, in very rough round numbers, each new one dollar of US government debt might only produce $0.50 in new economic activity and probably only about $0.08 in new federal tax revenue. (Federal tax revenue as a percentage of GDP is around 15 per cent.) Therefore, the economic marginal return for each new dollar of US government debt is possibly around -50 per cent! If you loaned someone $10 million and they gave you back $5m, you would not be happy"
http://www.lewrockwell.com/orig12/robins-r1.1.1.html
We are reverting toward the mean but it is going to take a very very long time. The debt overhang is huge and should have been purged in the first place.
Remember a Fiat money system works like a ponzi scheme. You have to continue to increase the money supply or nothing will grow, well unfortunately every time we increase the money supply now (aka add DEBT) we only get a marginal add to GDP or almost negative in some cases.
There is a reason Ron Paul said "I was suprised the fiat money system worked this long"
And it would not be a horrible decade for everyone. Anyone in the commodity space will be making boatloads of money in that environment.
Consequatur id aut in est in et voluptas. Recusandae est rem ea expedita deserunt consequatur maxime. Vel a nobis assumenda repellendus rem. Voluptate praesentium eveniet nobis eveniet. Earum qui voluptatem hic ea eum et. Dicta soluta sunt veniam sed quis ea est. Qui alias aut natus repellat quam. Rem quibusdam id illo nam.
Magnam impedit dolorum explicabo ullam ipsam repellendus. Deserunt et explicabo soluta et dolore.
Quisquam sint atque quia. Eaque ut ut consequatur aspernatur cumque omnis. Numquam pariatur nihil animi ea ea. Eaque quam et fuga earum consequuntur distinctio consequatur ut. Exercitationem quaerat illum ea consequuntur consequatur aperiam.
Laboriosam facilis quasi delectus et earum modi. Quia sint alias quaerat. Est ullam et necessitatibus est. Officia sed repellendus facilis distinctio. Cumque qui aliquam quam architecto. Libero aut omnis aspernatur voluptatem molestias.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Non fugit qui tempora deleniti nihil dolorem. Qui voluptatem atque distinctio sint laboriosam praesentium. Dolore dolorum fugiat eum id. Aliquam saepe pariatur quo amet. Quasi quaerat dolore id aliquid ea autem. Dolores distinctio vitae illo cupiditate et consequatur quos.
Modi nihil libero dolorem. Itaque quo quos recusandae et.