that the Federal Reserve Bank will initiate a third round of Quantitative Easing (QE3) anytime soon? The New York Times weighs the pluses and minuses in a thoughtful analysis (see: NY Times Article). Basically quantitative easing consists of the Fed issuing more debt and, simultaneously, buying it up so that more money is placed in circulation. This makes the stock market go up, drives down interest rates even further, and weakens the dollar.(which seems acceptable since the dollar has been kicking the Euro's backside of late.)
However, the Fed is just one horse in an economic troika team that includes the fiscal side of the federal government and U.S. industry. These other two horses are clearly not pulling their weight ... the administration and Congress because they are locked in a cage-match fight over whether Keynesian economics will ever work (it won't) ... and U.S. industry because it sees the new-taxes cliff looming in January and a much smaller chance that Obamacare will vanish (also add a hostile-to-business Obama administration).
My guess is that there is a strong possibility that the Fed will pull the lever on QE3 no later than its September Open Market meeting for no other reason than it too is a political animal (as we recently discovered the Supreme Court to be). Fed Chairman Bernanke (and his sidekick, Little Timmy Geithner at Treasury) want to keep their sinecures and there is almost no chance that they will if Romney is elected. Therefore, despite QE1 and QE2 not really pulling the U.S. out of the financial doldrums, Bernanke will force through QE3 to at least give Obama a fighting chance for four more years. This is all The Barry will need to pulverize fully the U.S. economy.
No comments:
Post a Comment