quantitative easing Archives - Page 3 of 8

October 29, 2012

Here Comes the Dollar Wave Again | WSJ.com

Wall Street Journal opinion on the impact of QE3 on Asia:

If Asia stays true to form, the world is in for a bout of foreign-exchange interventions — some coordinated, some not — in a quest for stability. Yet these interventions will only encourage greater speculative flows, as some investors start betting on the next policy move. This would be America’s problem, too, given the growing number of American businesses trading with Asia that will grapple with a chaotic exchange-rate system…….

via Review & Outlook: Here Comes the Dollar Wave Again – WSJ.com.

September 19, 2012

Japan Eases Monetary Policy in Surprise Move – WSJ.com

By MEGUMI FUJIKAWA And TATSUO ITO

TOKYO—The Bank of Japan took surprisingly strong steps to further ease its monetary policy on Wednesday, following similar steps by the Federal Reserve, as it tries to tackle entrenched deflation, an export-sapping strong yen and the impact of slowing global growth.

The central bank’s policy board decided at the end of a two-day meeting to increase the size of its asset-purchase program—the main tool for monetary easing with near-zero interest rates—to ¥80 trillion ($1.01 trillion) from ¥70 trillion.

via Japan Eases Monetary Policy in Surprise Move – WSJ.com.

Competitive devaluations, started by the ECB and followed by the Fed, PBOC and BOJ. Let the fun begin!

September 18, 2012

Job Creators in Chief | Global Macro Monitor

By Global Macro Monitor

Let us begin by saying we don’t like the title of this post and believe it is misleading.

The President cannot, in our opinion, directly create permanent jobs in the private sector. Of course, he can hire federal workers and/or direct taxpayer funds to, say, defense or infrastructure projects, which creates, though temporary, a derived demand for labor. More important, however, is the administration’s policies that incentivize private sector hiring through creating an environment that empowers businesses and entrepreneurs and gives them confidence to expand capacity.

….In the short term, however, quantitative easing and negative real interest rates can generate asset bubbles, which can affect the real economy and hiring. But the experience of the collapse of two major bubbles in just a little over a decade illustrates there is always pay back and the monetary induced artificial boom will eventually turn to bust.

via Global Macro Monitor | Monitoring the Global Economy.

September 13, 2012

The impact of QE3

Expect stocks and commodities to rally – especially gold.

The S&P 500 followed through above 1440, confirming the primary advance to 1560*.

Index

* Target calculation: 1420 + ( 1420 – 1280 ) = 1560

Spot gold broke through short-term resistance at 175, headed for a test of $1800/ounce*.

Index

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

September 13, 2012

Fed to Buy More Bonds in Bid to Spur Economy – WSJ.com

By KRISTINA PETERSON, JON HILSENRATH and MICHAEL S. DERBY:

After months of careful signaling, the Fed’s policy-making committee said it would buy $40 billion each month of agency mortgage-backed securities on an open-ended basis and said it could extend those purchases and buy additional assets if the job market doesn’t improve.

“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved,” the Federal Open Market Committee said in a statement issued at the end of its two-day meeting.

via Fed to Buy More Bonds in Bid to Spur Economy – WSJ.com.

I guess I was wrong about the Fed holding off until after the election.

September 5, 2012

The work of John Maynard Keynes shows us that counter-cyclical fiscal policy and an easing of austerity may offer a way out of the Eurozone crisis. | EUROPP

Simon Wren-Lewis, professor at Oxford University and a Fellow of Merton College, says the ECB failed to undertake quantitative easing at the appropriate time because of mis-diagnosis of the problem:

The story told by many is that the Eurozone crisis is a result of fiscal profligacy in some countries, and the need to put that right quickly because of market pressure. This account misses two essential underlying causes of the crisis, which have to be recognised if a solution is to be found. The first missing element ….. private sector demand was too strong, encouraged by large capital inflows from abroad and real estate bubbles…..The second key feature of the current crisis is also a result of excess private sector demand in periphery countries, and that is a banking crisis.

……There is an underlying pattern behind Eurozone policy errors. They reflect a view that macroeconomic difficulties are primary due to bad government decisions, while private sector decisions within a free market environment do not create problems. Whatever label we want to give this view (Ordoliberal or Anti-Keynesian), it is the fundamental cause of the current Eurozone crisis. Its persistence despite all the contrary evidence allows the crisis to continue and threatens the integrity of the Eurozone itself.

via The work of John Maynard Keynes shows us that counter-cyclical fiscal policy and an easing of austerity may offer a way out of the Eurozone crisis. | EUROPP.

September 3, 2012

The Fed and the impact of QE

Unless the Fed announces a new round of quantitative easing before the November election, I do not see the S&P 500 this year advancing past its 2007 high of 1560.

The market generally overreacts to balance sheet expansion by the Fed, anticipating higher inflation. What it seems to overlook is the deflationary effect of private sector deleveraging which should enable the Fed to maneuver a soft landing.

The real impact of Fed policy is to subsidize debtors and starve creditors — private investors and pension funds — of yield. The net result is that investors are driven to higher yields — accompanied by higher risk — which is likely to cause more pain at the next down-turn.

The only way to compensate creditors would be to lower taxes on interest, but I question how high this would rank in either party’s priorities.

September 1, 2012

Bernanke Speech Makes Detailed Case for Fed Action – NYTimes.com

The Fed Chairman hinted at further measures to stimulate employment but is still playing his cards close to his chest as to when and how much:

“It is important to achieve further progress, particularly in the labor market,” Mr. Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

via Bernanke Speech Makes Detailed Case for Fed Action – NYTimes.com.

August 22, 2012

When will the Fed QE?

Is the Fed likely to introduce new asset purchases before or after the November election? Peter Boockvar at The Big Picture writes:

Bottom line, of the 10 voting FOMC members, 8 are doves so it will always be the case that “many” are ready for more QE if need be. The hawks are few and far between. I stick to my belief that more QE is coming on Sept 13th as the Oct meeting is too close to the election and Bernanke won’t act in Dec if Romney wins. This could be his last chance for a while and Ben still seems to believe in the pixie dust of QE.

CNBC reports Nomura’s Bob Janjuah is predicting more quantitative easing from the Federal Reserve in December.

Those hoping for a big bazooka from the Fed or the European Central Bank before December will be disappointed, [Janjuah] said.

My view is that September is too soon: the Fed is likely to hold off until after the election unless the situation gets desperate. And December is too soon afterwards. Early 2013 seems a safer bet.

August 22, 2012

Fed Minutes Suggest Action Likely – WSJ.com

By JON HILSENRATH And KRISTINA PETERSON

The Federal Reserve sent its strongest signal yet that it is preparing to take new steps to bolster the recovery, saying that measures would be needed fairly soon unless economic growth picks up substantially.

The statement was included in minutes released Wednesday from the Fed’s July 31-Aug. 1 policy meeting. The minutes also indicated that a new round of bond buying, known as quantitative easing, was high on its list of options.

via Fed Minutes Suggest Action Likely – WSJ.com.