Skip to comments.Pimco's Gross: Employment Gains Show QE2 Is Working
Posted on 04/02/2011 11:39:18 AM PDT by DannyTN
Link Only - Bloomberg News was author.
(Excerpt) Read more at moneynews.com ...
Pimco often gets out of US treasury because their fund chases the highest yield not because they are pessimistic on the U.S.
And here you see the alleged harbinger of doom actually praising the Federal Reserve's quantitative easing program.
It’s simply inflation. It makes things look better for a short time before the real effects kick in.
Pimco's Gross believes it. I believe it. The Federal Reserve believes it.
High unemployment is worse than inflation. And the Fed can sell the treasuries they bought (so called printing money) on the market to soak up excess money supply, just as easily as they bought them, if inflation becomes to severe.
The inflation that we are seeing now and will see in the next few months is not so much from QE2 but from the oil price shock that is a result of our government's "do nothing" energy policy that we have had for the last 30 years.
117,000 of the 216,000 workers gains were from the Birth and Death Model.
The BLS projects a gain of ~100,000 per month and we import 125,000 new legal workers per month. That’s 225,000 net new jober per month to tread water.
Very perceptive of you in the macro or long run outcome of QE2. Employment is improving -- the old multiplier effect from the massive printing of money works every time.
The downside is that payback will be a bear (inflation) and an improving employment situation, as artificial as it may be, does enhance the Ascended One's reelection chances.
Agghhh !!!!! We know and Bill Gross does that this is all unsubstainable via the accounting equation. We are reaching a tipping point, and as much as this is for Bill not to get wip sawed owning old paper, is he potentially trying to "nudge" Fedzilla into the hard choice they have to make?
And the markets ( i.e. the S & P etc ) will rise as well and have historically done that with inflation if my memory is correct...
The short-term easy way out for bond investors is for the U.S. Taxpayer to suck it up and keep paying taxes and the Treasury keep rolling it’s bonds over.
I don’t think the “powers that be” in investing are admitting to themselves just what the U.S. losing first place means to the portfolios they manage and their own portfolios.
The economy doesn’t improve in actuality, it only appears to for a short while.
Zimbabwe’s stock market soared while their country was crashing and burning through hyperinflation
And GE is all bubbly over MaObama’s “Green” Renewable Energy plan because they are making Billions on it and not paying any taxes.
Pimco is like JP Morgan, they are in bed with the administration and are getting rich and powerful on the backs of average hard working people. They are also getting massive kickbacks from their covert involvement in the Bond Market. Like the Federal Reserve, they are the epitome of “Smoke and Mirrors”.
Rock and a hard place.
Retail price inflation cannot gain a foothold in the broader economy with stagnant to falling incomes and massive unemployment. We’ve seen it in the necessities, those basics that people literally must buy. Nowhere else for any length of time.
As for these other nonessential items? Those manufacturers, importers and distributors who have felt compelled to give in to upward pricing pressure in nonessentials have experienced a loss of sales. There is no support because there is no market for a given discretionary purchase at a higher price, due to the aforementioned income and employment situation.
An improved employment picture will make retail price inflation more of a possibility across the broader economy. Should this occur, it will kill the nascent recovery that is being fuelled by quantitative easing, sending us right back to square one.
We’re looking at a “lost” decade or two a la Japan, at best.
“Employment Gains Show QE2 Is Working”
Working to do what? Destroy the country? I agree then.
Employment Gains Show QE2 Is Working
“Just keep dancin there medicine man - it’s bound to rain eventually.”
“You don’t buy that easier money lowers the cost of making new investments and consequently spurs job growth?
Pimco’s Gross believes it. I believe it. The Federal Reserve believes it.”
The Weimar Republic and Zimbabwe also believed it...
QE2 is working?
Well, that’s relative to how short your perspective is.
Juicing up the economy for the moment? Yes. Enough to start getting some positive private sector employment started? Yes. Enough to grease the skids on Wall Street with growing (actual or inflated?) profits? Yes.
And, enough to build some big inflationary pressures into the economy? Yes. Big enough that they are already showing - big time - in basic food stuffs and basic consumables, before QE2 even ends? Yes. Big enough that the consumer “basket” of goods is rising rapidly while wages are flat? Yes. Which is going to very soon erupt in wage pressures? Yes. Which is going to add to domestic production costs? Yes. Which is going to slow employment growth again? Yes. Which will take some of the grease out of Wall Street? Yes.
So, it’s really a matter of perspective - short term or long range.
The only cure for an inflated currency bubble is to start deflating the bubble and wait until you’re done. Blowing up another cheap money-led bubble is not a cure but a curse that will make the final deflation worse.
The total M3 money supply is $13 trillion. Only 2/3rds of the $600 billion QE2 has taken place, so we are talking about $400 billion addition to the $13 trillion money supply. That's enough to cause a one time 3% inflation if everybody expected the FED to never undo what they've done. I expect them to at least partially undo what they have done. (And if they complete the entire $600 billion that should bump it to 4.5%).
The inflation we are seeing is oil related. And is basic supply and demand. We've sat on our hands and not secured ourselves a supply of energy. And that is foolish.
If we had a stronger dollar, the price of oil wouldn't be quite as bad. A week dollar didn't help matters back in 2008.