Core CPI 1.6% yoy It seems to me that because the Fed has to bend over to congress often they overplay the idea of boosting employment more than they actually do in reality. As a result people get the false impression that they care about employment so much. The Fed seem to subscribe to the Friedman type idea that trying to buy employment through more inflation will lead to both inflation and less employment in the long-run...
Another reason the Fed might be skeptical of QE3. M2 growth is quite strong http://federalreserve.gov/releases/h6/Current/ This is interesting because QE2 it seems contributed very little(or nothing) to M2 growth Before QE2 there was about $973b in excess reserves, now there is $1.63T, which is more than the $600b in purchases. So it seems that the assets purchases didn't help the money supply this time. Which would suggest the M2 growth is coming from bank loans
It seems that the additional $60b in growth of the excess reserves might have been the result of the reinvestment policy but I'm not sure yet
Although it appears the bank sold assets from around the start of QE2 up to the end of it http://federalreserve.gov/releases/h8/current/ I'm looking at the non seasonally adjusted figure for Securities in Bank Credit and Trading Assets. As they sell assets they increase their deposits with the Fed and also increase M2 a bit(assuming the buyer is a non-bank) This seem to explain the $60b discrepancy. The banks might have front runned the Fed and bought assets on the rumors, then they sold through QE2. So the discrepancy could be due an illusionary dip on excess reserves before QE2. During that dip banks were buying all kinds of assets and boosting M2, trying to make capital gains then they sold that stuff So perhaps QE2 did affect M2, but the impact was front loaded
I think Mr. Bernanke had to explain better his remarks because markets understood that QE3 was there if US Growth does not pickup however the real reason why he brought the possibility of QE3 is because his concern with the Euro drama is increasing. If the worse happens in Euroland the world will suffer a gigantic liquidity squeeze in USD due to the fact that almost 45% of the US Money Market Assets are invested in Bonds from European Banks. If the European Crises unfold, considering the political backlash the FED suffered in 2008 helping European Banks, the only way the FED will be able to fight this liquidity squeeze will be trough a QE3. His intention was to open a door for this event in the US Congress.
I posted my positions in this topic 25/02/11. Lets see how I am doing, right. MDW: +60% SLX: -20% SPM: +68% AVR: +35% GBG: -15% HL: -25% AUY:+6% So on average my stocks are up around 14% since then. Some of these positions are a bit larger then the others and I owned all of them before the 25th and the minuses wouldnt stand if I took purchasing prices but regardless... Clearly I could have gotten higher returns if I was more positioned in the winners and left out the losers right but on the other hand If I would have been more overweight the losers I could have been losing much more obviously so overal I can't complain I guess. I also own gold which is up 10% over the same time period. I must admit going through all the hassle of finding the right stocks etc I would have expected my stocks to outperform my gold exposure more then what these numbers show now. All in all as a total economic illiterate just a few years ago (still am largely) and looking at market conditions this last year I'm thinking I should count myself lucky with my performances this year. The plan still is for one of my stockpicks to outperform the rest significantly after which these gains can be spread amongst new opportunities.