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Media Push 3rd Round Of Quantitative Easing

From a very subtle Reuters:

Fed under pressure to act as world markets swoon

By Pedro Nicolaci da Costa Pedro [sic] Tue Aug 9, 2011

WASHINGTON (Reuters) – The Federal Reserve gathers on Tuesday under growing pressure to take some type of action to stem a financial market meltdown linked to fears of a new U.S. recession.

The trouble is, the Fed’s policy toolkit looks rather depleted, making some question the likely effectiveness of any further monetary stimulus.

While most analysts expect the Federal Reserve to not make any major changes in policy at its meeting on Tuesday, some wonder whether market disruptions of recent sessions warrant some kind of central bank intervention. The Fed will deliver its policy statement around 2:15 pm (1915 GMT)

U.S. stocks extended last week’s rout on Monday, with the Dow Jones industrial average ending 5.55 percent lower following Friday’s historic downgrade of the U.S. AAA credit grade by ratings firm Standard & Poor’s.

U.S. stocks saw their biggest one day drop since December 1, 2008 during the worst of the financial crisis of that year. Bank shares were severely punished, raising fears of a new market meltdown.

Isn’t it peculiar how much sympathy the news media and the rest of the Democrat Party suddenly have for Wall Street fat cats, when they can use their suffering as a way to push for more stimulus spending?

"If the Fed does nothing, it could prove to be a disappointment at this point," said JP Morgan analysts on a conference call to discuss the S&P downgrade.

Some economists argue the Fed is close to out of bullets. Interest rates are effectively zero and the Fed’s balance sheet stands at a record $2.9 trillion after an unprecedented program of unconventional monetary easing.

Still, there are a few things the Fed could do to reassure markets, including to suggest [sic] it will revise down its growth forecasts — the first signal that it is leaning toward further policy accommodation…

Huh? It will be very reassuring for the Fed to lower its growth forecasts? Economics really is bizarre.

Another move the Fed could make, but one that few expect, is another round of bond purchases. These are seen as controversial and only modestly effective, so policymakers will be reluctant to resort to them again

Don’t worry. The administration is just itching to print more money. Whether it will ‘do any good’ or not.

Here is more of the same subtle pressure, via a similarly discreet Associated Press:

Fed may react to market plunge and stalled economy

By Martin Crutsinger, AP Economics Writer
August 9, 2011

WASHINGTON – A plunging stock market and a stalled U.S. economy may force the Federal Reserve to use the dwindling number of tools it has left in an effort to boost growth and keep the country from sliding back into recession.

At the very least, the central bank is expected to acknowledge all the adverse things that have occurred since its policymaking committee last met in June.

But many private economists say they believe that the situation has grown so dark in recent days that Federal Reserve Chairman Ben Bernanke and his colleagues will be forced to do more

"I don’t think the Fed can stand by," said Mark Zandi, chief economist at Moody’s Analytics. "This is a crisis of confidence and the Fed needs to shore up confidence."

And nothing will "shore up confidence" like printing even more money a third round of Quantitative Easing.

Many analysts expect the Fed to choose among a menu of options that Bernanke laid out in his mid-year testimony to Congress in July.

Among the options Bernanke discussed was providing a clear indication in the Fed’s statement about how long the central bank intends to keep interest rates at record lows. More explicit language on interest-rate policy might boost investors’ confidence at a dangerous moment for the global economy…

On June 30, the Fed ended a $600 billion bond buying program, its second such effort, but it pledged to keep its holdings of those bonds constant until the economy started to improve.

Many investors would like to see the Fed launch a third round of bond buying. But the program has triggered a sharp debate inside the Fed about whether further bond purchases could set the stage for inflation down the road.

"There will be a high hurdle for considering a third round of bond buying," said David Jones, chief economist at DMJ Advisors, a Denver economic consulting firm. "Fed officials who opposed the second round will argue that the Fed has done all it can to help the economy and anything more will risk higher inflation down the road."

Bernanke in his July testimony said the Fed would consider more stimulus only if the economy weakened further and the threat of deflation returned, conditions that existed when he raised the prospects of the second round of bond buying a year ago.

Something tells us that the Fed is going to view the economy as ‘weakening.’

So get ready for QE3.

This article was posted by Steve on Tuesday, August 9th, 2011. Comments are currently closed.

13 Responses to “Media Push 3rd Round Of Quantitative Easing”

  1. GetBackJack says:

    Aw hells bells – this is stupid. Greenspan says we’ll never be introuble, we can just print more money!!


  2. Reality Bytes says:

    In business, you raise revenue with “A SALE”! We Need a Sale on Taxes! It’s that simple.

  3. untrainable says:

    Our government is a moronic parent who has maxed out all it’s credit cards with a 37% interest rate and can barely make the payments, yet continues to buy it’s kids $500 tennis shoes, designer jeans and a 99″ Plasma screen TV for itself. If this mentality continues, there is only one outcome. Bankruptcy, ruin, and the end of any possibility of recovery. At which point, the pitchforks and torches will become literal, and our streets become Greece on steroids.

    • TerryAnne says:

      When it gets too bad, they’ll just riot. See: London.

      “Mine! Mine! Mine!” (stolen from a Bill Cosby routine; the one where the kids are fighting over the shower…the “I have had enough!” one)

      “I want my $2! Where is my $2?!” (stolen from “Better Off Dead”; the annoying newspaper boy in that movie is the EXACT representation of the socialists and their dependents in society today…the kid spends the entire movie haunting the main character because he hasn’t been paid for delivering the papers…but the main character and his father refuse to pay him because he never delivers the papers on time or gets them anywhere close to the porch)

      “Gots to have them spanky kicks and great jams; times’ tough, you knows, and it be less trying when I gots my stuff like all thems evil and lazy rich people.”

    • proreason says:

      There’s a long history of societal crashes…not necessarilly because of economics, but for a variety of causes. You could summarize them by saying they were due to events that the people’s leaders wouldn’t or couldn’t foresee.

      Many, like the crash of the Inca culture when Cortez conquered them (likewise, for the Aztecs), were preventable if leadership had been wiser. The Incas had a powerful army several hundred thousand strong when a few hundred conquistadors defeated them. If they had rushed Cortez’ men and hadn’t been fearful of the war horses, they could easily have wiped Cortez out.

      Some crashes, like Rome, took long periods of time and were an accumulation of events and policies.

      The point is that there are many many precedents of societal crashes, most of which could easily have been prevented, and most of which occurred because leadership refused to give up their treasured notions.

    • TerryAnne says:

      I can’t think of a single socialital crash that wasn’t the direct result of inept leadership. Even those conqured by encroaching powers (such as the Ottoman’s) were a result of the leaders not taking the threat as they should.

      However, when leadership fails, it is the responsiblity of those lower to pick up the staff and carry-on. The problem, to date (minus the fall of the Soviet Union, as that is a different beast), has been people so mind [intercoursed] that they don’t know how to pick up the staff; they don’t know what they are supposed to be fighting for. Hence why the societies either disappear or implode (“mine! mine! mine!”).

  4. tranquil.night says:

    I haven’t checked if it’s what happened, but as Rush said yesterday and is right – the Fed looks for basing patterns in the market after it goes through its panic fits and then explicitly puts in large buy orders to try and drive the upward pressure to start the rally. It’s what we’re all looking to do but the Fed is one of those with the liquidity to give the market a short-term jolt. All the big institutions and money know this happens and usually follow right behind which makes the breakout self-confirming. Then the MBM squawkbox makes sure to get the mood-change out into the market culture “storms have passed, look at all the good buys.”

    It’s all ridiculous, especially today. Usually when you’ve had such large drop-offs, you’re going to immediately get a day of a sharp volatile rebound. Whether it stabilizes into a trend in the long-term probably does depend on Ben’s long-term plans.

  5. tranquil.night says:

    Eye of Sauron Watch: http://www.dailymail.co.uk/news/article-2023809/Did-George-Soros-win-10-1-return-S-Ps-US-credit-rating-downgrade.html (via Drudge)

    Looks like someone else is playing the Political Futures Market, eh?

    Need more cowbell.

    • proreason says:

      Funny, I was just remarking to ms reason yesterday that we haven’t seen much of Goldfinger lately.

      In unrelated news, wasn’t it strange that our esteemed Treasury Secretary, Little Timmy, declared with 100% confidence in April that there was “no risk” that the US would be downgraded. Surely, no other lofty public official has ever made such a pronouncement, since such a thing simply can’t be known with absolute certainty. It’s like declaring that the market will absolutely go up, something that no rational person, no matter the financial leader of the country would ever say.


    • tranquil.night says:

      Exactly. Beck predicted we’d lose our rating years ago. He coulda taken out that bet with even more awesome odds.

      Doc0 –

      To be perfectly honest, the investor who made 1,000% return on the American downgrade did not require any sinister influence or inside information.  He just had to read the actual statements released by the credit agencies, listen to what Obama and the Democrats were saying, and watch that national debt soar into orbit, on its way to the Moon.

      It wouldn’t be surprising if there was some kind of inside information leak.  That’s standard operating procedure in command economies.  As power shifts away from the free market to the political class, billionaires become eager customers for influence.  Buying the favor of politicians is much easier than market competition.  That’s why so many billionaires are eager supporters of Big Government.  They anticipate a very exclusive high-stakes poker table, where the game is played with marked cards, and losses are covered by the little people.


      Barry may be a blind ideologue and completely incompetent – indeed that may have been an asset to those who influence him – but he and they know exactly what they do. None of this is spontaneous, as Rush says, nor is it completely coordinated. It is opportunistic exploitation and a managed decline which will devolve into a plunder.

    • proreason says:

      I’m actually kind of skeptical about the $1B ‘bet’.

      But if it’s true, I would have to disagree with doc. Nobody would make such a bet without inside knowledge.

  6. Reality Bytes says:

    Why do you think the RNC refuses to attack Obama the way he plans to go after Romney?

    “What is the one thing that makes Obama different than any other president?” – Rep Shiela Jackson

    • JohnMG says:

      I’m not sure why they (RNC) are even concerned about the racism charge. It is bound to be thrown out regardless of what the response. Most of us are now content to wear it (you’re a racist) as a badge of honor. It’s especially rewarding to just laugh at their worn-out epitaph and watch them implode with indignation. Like the little boy who cried ‘wolf’ once too often, they have cheapened the charge to the point it is now a caricature. Just like when Obama speaks, nobody listens….not even his adherents. Even they know it’s bull sh*t.

      The real conservative candidate will soon tumble to this and the media will have to expose the racism charge for the sham that it is.

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