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Fed Open Market Committee: No big news of asset buys, but Fed will reinvest principal from...

Fed Open Market Committee: No big news of asset buys, but Fed will reinvest principal from agency debt and agency MBS in longer-term Treasurys. Near-zero rates for an "extended period." Even the policy tools statement wasn't strengthened. KC Fed's Hoenig again the lone dissenter.
Comments (15)
  • CautiousInvestor
    , contributor
    Comments (3057) | Send Message
     
    This was a widely expected step but it's more symbolic than anything else as the rollover purchases will be nowhere near the volume of QE1. Additionally, it's a step that can easily be taken without seriously writing down the prospects for the economy and embarrassing every federally employed economist including those on the Fed staff. Maintaining the size of the balance sheet can be easily argued to be a neutral posture.
    10 Aug 2010, 02:29 PM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    today nowhere near....but tomorrow is another day...to me it is a signal for other countries to get out now as as the Fed is buying...I would...
    10 Aug 2010, 02:38 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    And yet, the other countries are piling in (see latest Treasury auction).
    10 Aug 2010, 02:41 PM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    Get out of Treasuries? Why? We are another Japan. Treasuries are not a bad deal in a deflationary environment.
    10 Aug 2010, 02:53 PM Reply Like
  • Duude
    , contributor
    Comments (3382) | Send Message
     
    Next time Bernanke is testifying before Congress will be interesting. Imagine all the proposals Congress floats in front of him.
    10 Aug 2010, 02:51 PM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    It is really sad to see all thsi excitement in the stock market over these additional purchases of Treasuries.Do they really think that structural problems of the US economy and labor market can be fixed with a few treasury purchases here and there or some of form of monetary wizardry like QE. I wish it was so easy. If it was, somone else figured it out a long time ago. As it is, all the monetary shenanigans lead to is eventual destruction of the currency.
    10 Aug 2010, 02:56 PM Reply Like
  • Duude
    , contributor
    Comments (3382) | Send Message
     
    A real rally would have seen us in positive territory within minutes. This is suspect to fall in the last hour or within the next couple of days.
    10 Aug 2010, 03:02 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    What structural problems?? The problem in the economy is that there is no demand and no one is buying anything.

     

    As I've said before, structural problems in the economy would manifest themselves on the supply-side. Meaning shortages and inability to produce consumer goods. Those are structural problems. (The Soviet Union had that). We do not have those problems. We can produce anything. In fact, our productive capacity is huge and too huge for the current level of demand.

     

    IT'S ALL ABOUT DEMAND!
    10 Aug 2010, 03:13 PM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    Yes, structural problems like arcane tax code, too expensive workforce with mismatched skill set , lack of new productive enterprises, corrupt government and consumer indebted so much that it looks like it will take them 20 years to deleverage. US econmy is leveraged to a hilt and cannot sustain even a mild recession without falling apart.
    These problems are not comparable to the ones in USSR, yet they are no less serious. I would even argue that USSR problems were easier to solve. At least, they had plenty of pent up demand and no debt.
    10 Aug 2010, 03:19 PM Reply Like
  • Duude
    , contributor
    Comments (3382) | Send Message
     
    Structural problems? How about a 20 year old bubble in the real estate market. Real estate is one of the largest parts of our economy and its in shambles. We have the lowest mortgage rates in decades, home prices are declining and while many bank-owned homes are being purposely kept off the market.
    10 Aug 2010, 03:36 PM Reply Like
  • Machiavelli999
    , contributor
    Comments (829) | Send Message
     
    "How about a 20 year old bubble in the real estate market."

     

    Umm..I'm pretty sure that bubble has popped and everything you wrote after that statement confirms it.

     

    But the problem is the ramifications of the blown bubble is just simply fear and uncertainty. Also unemployment. That is why people aren't spending. Businesses are waiting for people to start spending again. People are waiting for businesses to start hiring again. But one won't start without the other. So, what's wrong with the government borrowing at record low levels to get this process started by hiring the unemployed??
    10 Aug 2010, 03:58 PM Reply Like
  • Duude
    , contributor
    Comments (3382) | Send Message
     
    No, if a bubble pops it doesn't leak anymore. The bubble is still leaking air all while the government keeps pumping air back into it through Fannie, Freddie and FHA.
    10 Aug 2010, 07:26 PM Reply Like
  • HAPPYCAPITALIST
    , contributor
    Comments (325) | Send Message
     
    Hiring people because you actually need them to produce something in demand is a productive use of labor, but hiring poeple just because they are unemployed is a waste of resources and leads to a decline in productivity and, eventually, lifestyle. No capitalist business would ever do such a thing because it would not be in their best interests to do so (just as keeping rates low will not cause there to be a spontaneous demand for loans). While it is a nice idea to have the governement hire the unemployed (just for employment's sake), those people aren't really being employed (unless they are providing a necessary service), they are just being paid.
    10 Aug 2010, 04:45 PM Reply Like
  • Dagnytg
    , contributor
    Comments (26) | Send Message
     
    Actually the bubble has not popped...because it hasn't been allowed to completely deflate. People are still bidding up the prices of homes especially foreclosed homes. The Federal government is still allowing people with little income and savings to get 0% and 3.5% down loans. Some states are still offering housing credits. Of course, we still have extremely low interest rates.

     

    The same fundamentals the contributed to the housing bubble are still in existence-low interest rates, qualifying unqualified buyers, no/low down loans, over bidding, gov. incentives...nothing has changed.
    10 Aug 2010, 04:53 PM Reply Like
  • FourBrane
    , contributor
    Comments (78) | Send Message
     
    This is absolutely true, as any investor whose tried to find a "bargain" residential property can quickly confirm. It's hard to find a deal that justifies the risk because buyer appetite isn't THAT good (so you might confidently improve and flip) but rents aren't high enough either. So, the money is lying around in pools instead of circulating in and out of houses.
    16 Aug 2010, 06:47 PM Reply Like
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