The Fed Placates the Market: QE II Begins [View article]
In the interest of bringing some standardization to Fed quantitative easing terminology, I'd simply clarify that today the Fed approved 'QE Lite' ($200 billion) and not 'QE 2.0' (estimated at anywhere from $1-5 trillion).
Also, I'm not convinced that approval of QE Lite implies that the Fed will automatically go forward and execute QE 2.0. There is a huge difference between rolling $200 billion a year in MBS runoff into 2 and 10 year U.S. Treasuries, and QE 2.0. For those interested I've previously discussed this in more detail here:
Why QE 2.0 Won't Be Announced at Tuesday's Fed Meeting [View article]
Back in late 2008 and early 2009 the market was worried about the end of the financial system as we know it. Against that backdrop, take a look at the following timeline of QE 1.0:
As you can see QE 1.0 wasn't simply launched in Dec. 2008. It was rolled out, tinkered with, and expanded over a period of several months. Since QE 1.0 the market has rallied around 70%.
The principal reasons the market will rally again (and probably already have to some degree based on expectations) on a QE 2.0 announcement is threefold:
1. The market anticipates that some of the new money printed by the Fed will make its way into the stock market.
2. The size of QE 2.0 that is being rumored ($5 trillion) will make QE 1.0 look like small beans.
3. The perception that Bernanke -- ala the 'Greenspan Put' -- has "got the stock market's back" will receive further confirmation.
In short, there are significant structural differences between the U.S. and Canadian housing markets.
Also, check out the Economist's tool on housing prices and you'll see the Canadian housing market looks a lot better than the U.S., Spain, U.K., or other housing bubble zones:
Is a U.S.- China Economic War on Its Way? [View article]
It can be argued that in the current state, the rest of the world -- China included -- can afford even less so than the U.S. any meaningful USD inflation.
USD inflation would drive up the price of Chinese exports (along with German exports, etc.) sold in America. This would reduce demand for Chinese goods, thereby causing the Chinese export driven economy even more trouble than it is currently experiencing with the bursting of its property bubble.
There is strong pressure for foreign governments to "mop up" inflationary liquidity pumped by the Fed into the system. Hence all the constant complaints from Russia, China, etc. all about the unfair advantage the U.S. enjoys due to the dollar's status as a reserve currency.
Having said that, the U.S. can't print an infinite amount of money (or issue infinite debt) without triggering a crisis in confidence. Where's the line? Unless you believe "This Time is Different", Rogoff's and Reinhart's 800 years of financial and economic historical research suggests the U.S. is currently positioned right on it:
Is a U.S.- China Economic War on Its Way? [View article]
And today comes news that China convicted and sentenced a U.S. citizen for eight years in a Chinese prison. His crime: he conducted geological research on oil wells. This is apparently considered a form of industrial espionage in China and "endangered our country's national security", according to the Beijing No. 1 Intermediate People's Court.
Is a U.S.- China Economic War on Its Way? [View article]
"But how do you take care of the lobbyists in Washington?"
Ultimately it is the American voting population that is accountable for our energy policy, and all government policy.
If you have chosen not to vote, or you support either one of America's two ruling parties, then congratulations -- you got exactly the government you chose.
People always want to blame the lobbyists or the politicians. Wrong answer. The "buck stops" with the American voting population.
Is a U.S.- China Economic War on Its Way? [View article]
Davewmart,
I just want to add one thing to the conversation regarding your linking to Rosenberg's take on the CNY "crawling peg" news. His comment "China has not added anything to its hoard of U.S. Treasury securities since June 2009" fails to address the very likely possibility that China is purchasing U.S. debt via other countries (e.g., U.K.).
There are a number of incentives for China to mask the size of their U.S. debt portfolio, including trying to neutralize China Bashing and pressure to change their currency policy. The bottom line is we don't know for sure what the exact size of China's hoard of U.S. dollars and debt is -- we only know that it is huge.
Many politicians/policymakers make use of scapegoats for political cover, and it appears Europe is being set up as the 'fall guy'.
Listening to Ben and Obama today, once again Europe was mentioned as the reason the economy is hitting headwinds. Europe was also cited in the most recent Fed communiques.
It's going to be a lot more conveinent politically if the problem is viewed as external.
I don't disagree with your point that the Fed and Treasury have been moving in lockstep for quite awhile now.
And I hope you're right about the American public waking up to what's going on. The recent inability of Congress to further extend benefits suggest that there is some growing sensitivity to unchecked fiscal largesse and bailouts.
However, while Congress may (and is starting to) reign in spending on the eve of midterm elections, I'm not sure the Fed will follow suit. The failure of Congress to pass another stimulus puts even more pressure on the Fed to act, and the timeframe during which action could make an impact is growing late. In other words, I'm not sure the Fed can wait until after November elections to launch "monster" QE II.
The Fed Placates the Market: QE II Begins [View article]
Also, I'm not convinced that approval of QE Lite implies that the Fed will automatically go forward and execute QE 2.0. There is a huge difference between rolling $200 billion a year in MBS runoff into 2 and 10 year U.S. Treasuries, and QE 2.0. For those interested I've previously discussed this in more detail here:
www.polycapitalist.com...
Why QE 2.0 Won't Be Announced at Tuesday's Fed Meeting [View article]
By engaging QE Lite the Fed has clearly opened the door to QE 2.0.
Again, I wouldn't expect to see full blow QE 2.0 until sometime after November's election unless there is some type of crisis.
Why QE 2.0 Won't Be Announced at Tuesday's Fed Meeting [View article]
However, I doubt all $3-5 trillion -- which is the amount the Fed has penciled in as the upper QE bound -- is fully priced into the stock market.
Why QE 2.0 Won't Be Announced at Tuesday's Fed Meeting [View article]
docs.google.com/viewer...
As you can see QE 1.0 wasn't simply launched in Dec. 2008. It was rolled out, tinkered with, and expanded over a period of several months. Since QE 1.0 the market has rallied around 70%.
The principal reasons the market will rally again (and probably already have to some degree based on expectations) on a QE 2.0 announcement is threefold:
1. The market anticipates that some of the new money printed by the Fed will make its way into the stock market.
2. The size of QE 2.0 that is being rumored ($5 trillion) will make QE 1.0 look like small beans.
3. The perception that Bernanke -- ala the 'Greenspan Put' -- has "got the stock market's back" will receive further confirmation.
Canada’s Housing Market: Look to the Banks for Clues About the Severity of the Bubble [View article]
www.polycapitalist.com...
In short, there are significant structural differences between the U.S. and Canadian housing markets.
Also, check out the Economist's tool on housing prices and you'll see the Canadian housing market looks a lot better than the U.S., Spain, U.K., or other housing bubble zones:
www.economist.com/node...
Canadian housing prices compared to average income have actually *gone down* over the last decade.
Is a U.S.- China Economic War on Its Way? [View article]
Also, it sounds like you haven't read their book, which I highly recommend.
Is a U.S.- China Economic War on Its Way? [View article]
USD inflation would drive up the price of Chinese exports (along with German exports, etc.) sold in America. This would reduce demand for Chinese goods, thereby causing the Chinese export driven economy even more trouble than it is currently experiencing with the bursting of its property bubble.
There is strong pressure for foreign governments to "mop up" inflationary liquidity pumped by the Fed into the system. Hence all the constant complaints from Russia, China, etc. all about the unfair advantage the U.S. enjoys due to the dollar's status as a reserve currency.
Having said that, the U.S. can't print an infinite amount of money (or issue infinite debt) without triggering a crisis in confidence. Where's the line? Unless you believe "This Time is Different", Rogoff's and Reinhart's 800 years of financial and economic historical research suggests the U.S. is currently positioned right on it:
www.nytimes.com/2010/0...
Thoughts on Krugman's 'Myths of Austerity' [View article]
www.zerohedge.com/arti...)
To his suggestions I'd also add term limits and some type of tax reform (e.g., Fair Tax) for consideration. Thoughts?
Is a U.S.- China Economic War on Its Way? [View article]
news.yahoo.com/s/ap/20...
I'm sure this guy is absolutely thrilled about probably having even more stubbed lit cigarettes put to his arms over the next eight years.
Is a U.S.- China Economic War on Its Way? [View article]
Is a U.S.- China Economic War on Its Way? [View article]
Ultimately it is the American voting population that is accountable for our energy policy, and all government policy.
If you have chosen not to vote, or you support either one of America's two ruling parties, then congratulations -- you got exactly the government you chose.
People always want to blame the lobbyists or the politicians. Wrong answer. The "buck stops" with the American voting population.
Is a U.S.- China Economic War on Its Way? [View article]
If you haven't already seen the video I think John Stewart/The Daily Show pretty much nailed this topic:
www.polycapitalist.com...
Is a U.S.- China Economic War on Its Way? [View article]
I just want to add one thing to the conversation regarding your linking to Rosenberg's take on the CNY "crawling peg" news. His comment "China has not added anything to its hoard of U.S. Treasury securities since June 2009" fails to address the very likely possibility that China is purchasing U.S. debt via other countries (e.g., U.K.).
www.zerohedge.com/arti...
There are a number of incentives for China to mask the size of their U.S. debt portfolio, including trying to neutralize China Bashing and pressure to change their currency policy. The bottom line is we don't know for sure what the exact size of China's hoard of U.S. dollars and debt is -- we only know that it is huge.
Is the Fed About to Go Nuclear? [View article]
Listening to Ben and Obama today, once again Europe was mentioned as the reason the economy is hitting headwinds. Europe was also cited in the most recent Fed communiques.
It's going to be a lot more conveinent politically if the problem is viewed as external.
Is the Fed About to Go Nuclear? [View article]
I don't disagree with your point that the Fed and Treasury have been moving in lockstep for quite awhile now.
And I hope you're right about the American public waking up to what's going on. The recent inability of Congress to further extend benefits suggest that there is some growing sensitivity to unchecked fiscal largesse and bailouts.
However, while Congress may (and is starting to) reign in spending on the eve of midterm elections, I'm not sure the Fed will follow suit. The failure of Congress to pass another stimulus puts even more pressure on the Fed to act, and the timeframe during which action could make an impact is growing late. In other words, I'm not sure the Fed can wait until after November elections to launch "monster" QE II.