No kidding:Goldman still expects a further $1 trillion of QE

Discussion in 'Wall St. News' started by ASusilovic, Sep 7, 2010.

  1. More Bah! Humbug! from Goldman’s chief economist Jan Hatzius.

    Although last week’s economic data makes a big “QE2″ announcement from the Fed unlikely at the September 21st FOMC meeting, Hatzuis still believes more unconventional monetary easing is on its way, via a $1,ooobn purchase of Treasuries – because we are still in a soft patch.

    Hatzius writes in his latest ‘US Views’ note:

    (Emphasis ours).

    Later this year or early next, however, we do expect a return to unconventional monetary easing. This is because we strongly disagree with the notion that the recent slowdown in activity is a temporary “soft patch” in an otherwise fairly decent recovery, which seems to underlie the Fed’s forecast of a reacceleration in 2011 after a modestly slower period in 2010H2. On the contrary, we believe that the stronger growth of late 2009/early 2010 was a temporary “firm patch” in an otherwise extremely anemic recovery, and there is a sizable (25%-30%) risk of a renewed recession. As this becomes clear, Fed officials are likely to act.

    The most likely policy shift involves purchases of US Treasuries, although changes in the forward-looking language are also a possibility. Ultimately, any new purchases are likely to total at least $1 trillion, but today’s NYT interview with outgoing Vice Chairman Kohn suggests that Fed officials may only announce a smaller amount upfront and then adjust their plans in response to new information (see Retiring Fed Official Considers More Bank Action). The advantage of such a policy is that it may be an easier “sell” to skeptical officials, although the risk is that the markets will view it as half-hearted.

  2. achilles28


    They'll have to. Or nationalize the GSE's and mortgage industry. Until then, it's more deflation.
  3. It is better to vertically breakup big corporations into smaller entities to solve unemployment crisis and promote competition.
  4. What? And leave us with "too many to fail" instead of "too big to fail"?
  5. Tsing Tao

    Tsing Tao