Would QE2 be possible if stocks go up?

Discussion in 'Economics' started by Ghost of Cutten, Oct 5, 2010.

  1. Stocks have rallied on expectations of QE2. Let's say they rally some more. If stocks are up 15-20% from the lows by the next Fed meeting, can QE2 be justified by the Fed? After all, a stock recovery like that would imply a strengthening economy. It might be hard to justify a risked repeat of the Greenspan 2003-04 blunder of a century merely by keeping rates at 0.5%, let alone increasing the money supply.

    So, if Bernanke wants to do QE2 and have a good excuse, wouldn't he want stocks to *fall* between now and early November? That way, he could point to economic fears, the S&P down 10%, negative news headlines, and then QE2 to his heart's desire.

    Perhaps we should be on the lookout over the next 5 weeks for Fed members warning about evidence of an economic slowdown.
  2. im expecting full blown second leg down. why would big players allow government to dilute their value of their cash reserves to benefit small fry ?!?!? Small players are more or less in debt. No cash. So, who will win this one ? Person with cash or person with debt ?