Skip to comments.Just a reminder: QE3 will work just as well as QE1 & 2
Posted on 09/21/2012 10:17:24 AM PDT by SeekAndFind
It comes as no great surprise that Rick Santelli isn't a big fan of the latest round of quantitative easing. The CNBC analyst tells Pimco chief Mohammed el-Arian that the QE3 will hammer retirement plans and the most responsible savers, and won't solve the problem that the Fed wants to address --- joblessness. Santelli has a lengthy rant about government policies that push greater central control and its interlocking effect on the Fed's inflationary policies, but mostly he tells el-Arian that it's not going to work:
Earlier, el-Arian admitted that the QE3 now looks like a Fed vehicle to explicitly introduce inflation as a last-ditch effort to generate some growth even as it degrades assets. Calling it a "reverse Volcker," the Pimco chief offered some support for the program, but noted that the Fed was now in experimental territory, and that future generations would have to clean up the mess:
The Federal Reserve and Chairman Ben Bernanke not only are willing to tolerate inflation but actually are trying to create it, with a “mess” left behind for their successors to clean up, Pimco’s Mohamed El-Erian told CNBC.
The reason, the Pimco CEO said, is that the risks outweigh the rewards as the central bank tries to stimulate an economy that still is foundering three years after the financial crisis recession ostensibly ended. …
But critics charge that the balance sheet expansion, which will go well past $3 trillion, is causing inflation. Former Fed governor Kevin Warsh told CNBC last week that the Fed will have a difficult time finding an exit from the years of QE programs, a point on which El-Erian agreed.
“This is true for all central banks the (European Central Bank), the Fed, the Bank of Japan, the Bank of England. We are so deep into unfamiliar territory, so deep into experimental mode, that we don’t know what the consequences will be,” he said. “Whoever comes afterward will have to clean up the mess.”
Former Morgan Stanley executive Stanley Roach told CNBC today that future generations would not only have to clean up the mess, they’d still have to solve the problem — because QE3 will work just as well as the first two voyages on paper printing did:
The U.S. Federal Reserves latest round of quantitative easing is not going to bring down unemployment nor put more money into the consumers hand, according to Stephen Roach, senior fellow at Yale University.
Roach, the former non-executive chairman of Morgan Stanley Asia, told CNBC on Friday that it was going to be exceedingly difficult for the new policy measures to bring the jobless rate down.
I hobnob with all these macro theorists at Yale, they dont see any evidence of a linkage between liquidity injections in the mortgage-backed securities industry and the labor market distress in the U.S., Roach told CNBC Asias Squawk Box.
CNBC noted the bet placed by the Minnesota Fed’s Narayana Kocherlakota, who had previously opposed another round of quantitative easing, but missed part of the deal:
The Minneapolis Fed President Narayana Kocherlakota added this week that the central bank should vow to keep rates near zero until the jobless rate falls below 5.5 percent.
Actually, Kocherlakota said it should continue until unemployment dropped to 5.5% or inflation hit 2.25%. QE3 may well drive that inflation number up long before we get past the mid-7s on unemployment, let alone start increasing the civilian population percentage rate from its 31-year low. Far from being an endorsement of Ben Bernanke’s QE3, it looks more like a short leash.
QE3 will be another Obama give-away.
To paraphrase Judge Napolitano, Why do we know more about the inner workings of the CIA than we do about the Federal Reserve?
Without QE, bond investors would take a haircut sooner. Interest rates would skyrocket sooner, and bond prices would dive. Markets would crash. Revenues (really debt) would immediately slow to a trickle and nearly stop. Then everyone else dependent on government/investments for income would take a haircut. Large numbers of government employees would be laid off much sooner.
QE keeps the debt recirculating and the bipartisan political class from sinking right now. Yeah, it’s going to happen. The big, general choice is between now and later.
Me? I’ll only watch the show. It’ll be like the game of musical chairs but with armed participants (shrinking number of ever-nastier regulatory, public education and related recipients of debt/revenues feeding on each other).
Bernanke is the boy stuck with the job of keeping his finger in the dyke, even though his dishonest, bipartisan, political beneficiaries (nearly all depending on government incomes and funny investments without a manufacturing base) shriek accusations against him for doing so. And he and they know all the while that the ugly thing’s eventually going to blow anyway.