Skip to comments.Bernanke Twists Again Like He Did Last Summer ($267B) – But Will It Help?
Posted on 06/20/2012 12:44:03 PM PDT by whitedog57
Today, Fed Chairman Ben Bernanke peeked around the corner and sang Lets Twist Again Like We Did Last Summer. Oh, lets Twist again, Twisting time is here.
Not really of course. But The Fed did announced that they are extending Operation Twist until the end of the year. And Twist will be increased to $267 billion. No MBS stimulus either, so Agency MBS slumped today.
Federal Reserve Bank of Richmond President Jeffrey Lacker voted against the committees action on Wednesday because he opposed continuation of the maturity extension program, according to the statement. Lacker has dissented at all four FOMC meetings this year. [Lacker is my new favorite Fed President!]
The Fed lowered their central tendency estimate for U.S. 2012 gross domestic product growth to 1.9 percent to 2.4 percent from 2.4 percent to 2.9 percent in April. Estimates for 2013 centered around 2.2 percent to 2.8 percent, compared with 2.7 percent to 3.1 percent in the previous forecast.
On the unemployment front, The Fed forecasts that the jobless rate will average 8 percent to 8.2 percent in the fourth quarter of this year versus an stimate of 7.8 to 8 percent in April. For next year, their unemployment forecasts centered around 7.5 percent to 8 percent versus prior estimates of 7.3 to 7.7.
To paraphrase Lt. Col. Kilgore from Apocalypse Now!, I smell QE3 in September. It smells like panic.
But M2 Money Velocity is at the LOWEST POINT SINCE 1959 indicating that monetary policy is ineffective. Should Bernanke wear an I Like Ike! button? Im sure he does NOT like money velocity at all-time lows.
We will see if The Fed twists again, like the did last fall. Maybe Chubby Checker could do a public service announced for The Fed.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
Will it help?
Did it help the first time?
Not that I recall.
If you are 2 MILLION DOLLARS IN DEBT AND OVERDRAWN AT THE BANK, if you cashed a $10,000.00 check on an account with no funds left in it... and maxed out four more credit cards... would it help you avoid bankruptcy?
It’ll do what it did last year.
But it will do it earlier than last year.
Well I did refi my house at 3.75 fixed for 30 yrs.
I hope to pay it back with Baraqqi/Bernanke/Geithner minibucks.
And that you will. Unfortunately, you'll pay for groceries and fuel [and everything else] with those same minibucks, thus wiping out any advantage.
So you don’t think there’s a relative advantage to borrowing long term at low fixed rates if you expect inflation?
Oh, no. I think there could be -- if it's a deliberate decision made for that reason.
If, say, you run a business and are positive that future revenues will increase, then your proposition might be sound. But the trouble with inflationary monetary policy is that accurate economic calculation becomes impossible. When price inflation hits, no one knows which commodities and services will rise more and more quickly. You're in a crapshoot.
I often read people's comments who dismiss the harm inflation causes by citing the "debt-paid-back-with-cheaper-dollars" nostrum. I think many of them tend to ignore [or are unaware of] the damage done to the rest of their economic situation.
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