QE3?

[superfrank]

Is seems from this WSJ article that QE3 is not the certainty many think it is (including me!).

http://online.wsj.com/article/SB1000142 ... 45430.html

I wonder if privately the FED have realised that QE has failed - yeah it boosted asset prices (but this is harmful, not helpful, to long term growth). The money mainly ended up in commodities causing global inflation problems.

So what happens if the central banks stop meddling and let the market adjust naturally? My view is that commodities would come under pressure (especially oil) and there there would be a big correction in equity prices (FTSE below 4000).

This is how I reckon it will play out...
- more weak economic data as QE2 wears off through the summer.
- oil and equities under pressure and some sharp falls similar to what happened in 2008.
- political pressure mounts as people demand that "something must be done" (crybaby capitalists as Gerald Celente calls them).
- the govt. and FED cave in and QE3 begins (maybe not called QE this time, for political reasons, but essentially the same thing - cheap/free money).

You can come back and mock me when nothing like this happens!

[rubysglory]

You probably on the right track superfrank. Rising commodity prices as the world struggles to satisfy China's hunger, higher food prices, consumer spending all but non-existent and the inflation genie raising its ugly head. With US interest rates already at zero, and with no QE3 monopoly money on the table, this might well be the medium term future of world financials.

rg

[superfrank]

PIMCO'S Gross says Fed to unveil QE3 at Jackson Hole
http://www.reuters.com/article/2011/06/ ... L820110622

Bill Gross on Wednesday said the Federal Reserve will likely hint at a third round of bond purchases, better known as "quantitative easing," at its next Jackson Hole meeting in August.

Jackson Hole is an annual global central banking conference, led by the Fed, which takes place at Jackson Hole, Wyoming. It was at this event last year that Fed chairman Ben Bernanke said the U.S. policymakers were prepared to make a major new investment in government debt or mortgage securities if the economy worsened significantly or if the Fed detected deflation -- a prolonged drop in prices of wages, goods and assets like homes and stocks.

Gross, the co-chief investment officer of PIMCO, the world's top bond manager, on Wednesday said on Twitter: "Next Jackson Hole in August will likely hint at QE3 / interest rate caps."

If stocks/commodities weaken through the summer, then buying before Helicopter Ben opens his trap could prove a good bet...



The problem for the Fed is that, in trying to prop up the stock and housing markets, they also end up boosting commodity prices which in turn causes problems of higher fuel, food and input costs which suppresses consumer demand because people have less money to spend after paying for necessities. The law of unintended consequences.

[Iron]

PIMCO'S Gross says Fed to unveil QE3 at Jackson Hole

That might explain why the FTSE is tumbling today...

When will the fools realise that you can't solve your problems by printing money?!?

Jeff

[Iron]

Economic trouble puzzles Fed chief, too - http://apnews.myway.com/article/20110622/D9O16AK02.html

I suppose at least no-one can accuse Mr Bernanke of being too proud to admit his lack of insight...

Jeff

[superfrank]

He's supposed to be an expert on the Great Depression... so much so that he's going about creating a second one.

In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic. In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." (He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."

http://en.wikipedia.org/wiki/Ben_Bernanke

[superfrank]

No interest rate rises until unemployment drops and the economy grows, says Mervyn King
http://www.dailymail.co.uk/news/article ... -King.html

Sir Mervyn also indicated yesterday that a large cash injection directly into the economy to boost asset prices and spending was possible.

I think someone needs to remind this cretin that it was cheap money fuelling an asset price boom that caused the financial crisis!!!

[Iron]

No interest rate rises until unemployment drops and the economy grows, says Mervyn King

So that rules out an increase in interest rates for at least the next 3 years then...

Jeff

[superfrank]

No interest rate rises until unemployment drops and the economy grows, says Mervyn King

So that rules out an increase in interest rates for at least the next 3 years then...

Jeff

30.

[Iron]

What would happen if the US went broke?

http://uk.finance.yahoo.com/news/What-h ... 1.html?x=0

"If you have $14 trillion in debt, you shouldn't anger your creditors."

[superfrank]

They are broke.

US jobs creation stalls in June
http://www.bbc.co.uk/news/business-14081789

QE3 nailed on now.

[Iron]

They are broke.

US jobs creation stalls in June
http://www.bbc.co.uk/news/business-14081789

QE3 nailed on now.

I like the following bit of obsfucation from President Obama:

"We have added two million new private sector jobs over the last 16 months, but the recession cost us 8 million"

So in other words, unemployment has risen by 6 million people, Mr President?

Jeff

[superfrank]

Obama, like all senior politicians, is only interested in his 'legacy'. 'didn't do Blair much good.

self interest and short-termism... a recipe for financial disaster.

[Iron]

A funny exchange between Mr Bernanke and a senator who tells him some home truths:

http://www.youtube.com/watch?v=2NJnL10v ... r_embedded

Jeff

[superfrank]

Ron Paul is a top man, one of a few decent ones.

Ron Paul: "Do you think gold is money?"

Bernanke: [big pause], "No".

Ron Paul: "Why do people hold gold and diamonds?"

Bernanke: "It's tradition".

Brilliant. You couldn't make it up.

As RP said, they could have given the printed money to each American citizen ($17,000 each) and achieved a better outcome. But they obviously thought it better to give it to their friends who caused the whole mess in the first place.