Fisher: QE not _obviously_ a done deal

Oct 7 (Reuters) - The U.S. Federal Reserve stands to gain little by pumping more cash into the U.S. economy, and risks sending "confusing signals" to businesses, a top Federal Reserve official said on Thursday.


http://www.reuters.com/article/idUSNLL7LE6J420101007

 

Oct. 7 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said more asset purchases by the central bank may not be enough to get “money moving” in the U.S. economy.

If the Fed increases “excess reserves and they just sit there on the asset side of commercial banks’ balance sheets not being relent, you’ve merely gone through an interesting bookkeeping exercise,” Greenspan said today at a foreign- exchange conference in New York sponsored by Bloomberg LP, the parent of Bloomberg News.

“You’ve got to break that psychology that prevents that current trillion” in reserves from being relent, said Greenspan, a paid speaker at the event.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a2_GIwM7bQZ4

The old chief has spoken...

 

He might want to tell that to the NY Fed president

 

The whole thing is surrealistic to me. It's like this, the world gets news that the San Andreas fault is shaking, shifting and widening, at an alarming rate, giving off "small" earthquakes to release energy. We get more data on a daily basis that this is not going well. The world says, it's ok, just use the power of positive thinking and we can divert the big one.

So, markets get horrible news that unemployment continues to be catastrophic and may have structural problems that won't go away. So we pull a blanket over our eyes and throw money at the problem.

How is this a long term solution to a problem that can only be resolved by changing the skills of an entire nation, which willl take a generation?

 

Its a matter of monetary growth. M2 growth is too weak and delevering after financial crisis lasts on average 7 years(this hurts M2 growth), the Fed has no choice, they can yap about GDP and employment but the real reason they are doing this is because otherwise the money supply would tank and deflation would take over. You dont want debt deflation do you?

 

QE3?

It has lost any mkt-moving impact and was the only liquidity driving us higher. God help us when the actually announce the stim. It will mark the day of the short of the decade.

 

Corn, wheat and beans are limit up today. Gold at all time highs, copper near there. What deflation?

It is as if the only deflation we care about is housing prices, and that is going DOWN if you stand on your head.

 

You are handpicking data. Check out the 6m and 12m inflation data from the dallas fed
http://www.dallasfed.org/data/pce/index.html

Disinflation is a reality and the Fed is responding to the rule law that demands than to maintain price stability and full employment

 

These guys are a law unto themselves, they are the kingmakers of the USA

 

Uh, that Bernanke speech pretty much nails it for me. QE2 a done deal, with the only question remaining is, how much how fast. I am guessing $500B, even this number to be flexible, probably announced in tranches so as to keep some doubt in markets.

How much of this is in the market already? At least 50% of this number - maybe all of it.