Just because the stock market doesn't float forever and retraces, people are calling for QE3? You've got to be fking kidding me. What type of logical reason is that? The only stimulus banks can ever do is allow liquidity to come at a minimal cost, which they have done. Everything else, they have no control over. Another round of QE3 makes no sense, as literally, all this does is feed liquidity into the system. At some point this liquidity will reach mars and the moon. QE, xyz, repo, open market, whatever, it's the same thing. The truth comes from economic numbers. What the US needs is true ORGANIC GROWTH. It's as simple as that, and when it does, capital will flow into the USA again.
I agree with most of what you are saying. For the record I don't think QE3 is the right policy to pursue. However what I have been talking about in this thread is the likelihood of Bernanke implementing QE3. This is very different of what I think he should do.
If the politicians need a 'reason' to create stimulus, then I would obviously agree and understand that it would be marketable to the public at times of grief. The probability of QE3 has to warrant itself. The question is, what warrants it. Clearly, cycles of peaks and troughs DO NOT WARRANT QE3. You will see QE3, if economic numbers start to display an 'obvious' downward trend. Ask yourself where the NUMBERS STOOD during QE1, QE2, as opposed to using the stock market as an indicator. Green shoots were the name of the game when QE1, 2 took place. From what I recall, earnings were good as well. QE3 should be the final remedy to help the ECONOMY get its leg up. It isn't there to spoon feed the markets because it will need to fall and retest the lows ITSELF, not w/ more gov't intervention. Markets and humans need to live off the silver platter. When they do, the markets might return to a more natural science of supply and demand. But given the way things are, gov't will CONTINUE to try meddle with it, as seen in Japan's Yen intervention. I would like to see increased rates to see how the capital markets react, and then allow QE3 to bandaid the transition. The question is how the markets will react to a rate hike!!
I agree, but given that there has been some weak economic data lately, including two bad jobs reports in June and July, given the implosion in Europe, given the massive decline in stock prices, it's highly likely Bernanke will be dovish tomorrow. Maybe not Jackson Hole 2010 type dovishness, but at least enough to help people (not me) who are bullish on equities. Not what I think he should do, but what I think he will do.