An article a few weeks back titled "QE3 will just keep the lights on" is very apropos to this discussion. The efficacy of these policies will continue to deteriorate as time goes on. We've already reached the sort of upper boundaries as far as political pressure is concerned (in a quasi stagflationary environment). The balance of trying to keep the TBTF's solvent while not producing runaway commodity inflation is a damn near impossible task. It also doesn't help the cause that it does nothing for unemployment while simultaneously putting on full display that the "emperor has no clothes" each and every time there is a "stall" between episodes of QE... The true "blink" moment will arrive soon enough, when we are on our fourth or fifth round and assets deflate en masse. Remember, unless you can produce inflation greater than previous inflation, this thing unwinds. Hence, the parabolic amount of deficit spending in the past 2 years just to maintain a perverse semblance of the status quo. Anybody thing it's remotely possible (in this political environment) to do a repeat performance of the past two years of borrowing?
The proponents could care less as they are simply caught up in the day to day survival of their precious "rackets". It's also no suprise that the one's most panicked by the possible austerity are those whose livelihood depends on near constant asset inflation. It's one of the main reasons why I think the political landscape will change immensely as the younger generations will not support more ponzi-nomics for ageing Baby Boomers. Destroying the currency to get the political cover of the S&P 500 rallying x percent is a tired trick and it's well past its expiration date.
Agree, but the problem is that as yet there aren't enough US voters who think the same. That's why QE3 is highly likely. If and when QE3 causes oil to go above $120 and stay there, and causes gasoline to go above $5 and stay there, then maybe there will be enough outrage so that QE4 isn't a certainty when the next bout of economic weakness arrives.
If? Oil was around $68 or so when QE3 was even hinted at in last years Jackson Hole speech. It promptly took off and went to $110 before sliding back to $100. If such a thing happens again this August, expect - at the minimum, the same type of spike (to $140) and a settle down to $130. That's assuming, of course, all the reserves still sitting on the Fed's balance sheet aren't put to use and make it much, much worse.
They plug one hole and another leak springs up elsewhere in the sinking ship. Soaring gas prices just means the money has to come out of some other sector of the economy. More jobs lost, more economic malaise, more contraction elsewhere. So far we've seen that even with record low mortgage rates, it still can't stop the bleeding in many areas of the country. And that has taken place with monumental amounts of bailout/stimulus, etc... Going forward there is absolutely zero political appetite for "more of the same". I don't doubt that QE3 will be implemented, but I just believe the efficacy is circling the drain.
I agree that the hint of (and then implementation of) QE3 may cause $WTIC to go to $130 and beyond. However the fear of this occurring is unlikely to deter Bernanke and company from hinting at (and then implementing) the policy - given that $WTIC is not at this price level yet. While $WTIC remains below $110 and gasoline below $4, QE3 remains a strong possibility in the event of a significant stockmarket decline and/or more bad economic numbers, especially those relating to employment.
ISM misses expectations US Jul ISM Manuf 50.9 Survey: 55 Prior: 55.3 http://twitter.com/#!/alaidi/status/98030375527399425 Gold 1628 bring on QE3
Jun. Personal Income: 0.1%, vs. Cons. 0.2%; Spending: -0.2%, vs. Cons. +0.1% might not be as important as the non-farm payrolls or durable goods, but still another data point that indicates slower economic growth. gold +1.08% at 1639
http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm Next meeting Tuesday 9 August ES below 1250 and recent weak economic data. Likelihood increasing that there will there be hints about QE3.