Skip to comments.Fed Now "Doing it Right"
Posted on 12/14/2012 8:39:07 AM PST by Kaslin
How do we know that the Fed pays attention to the things we write? Previously, commenting on the apparent lack of effect that the Fed's latest round of quantitative easing has had on stock prices, we observed:
1. The Fed is doing it wrong. In the two previous rounds of QE, the Fed purchased large quantities of U.S. Treasuries. So far in this round, the Fed is only purchasing Mortgage Backed Securities. The stock market just doesn't get the same bang for the buck as when the Fed buys up Treasuries, which acts to reduce long-term interest rates across a wider swath of the economy, which is really what helped boost stock prices in earlier rounds.
2. QE, as an effective policy, is running out of gas. The interest rates that the Fed might hope to lower in its QE programs started off at a much lower level, and a lot closer to their minimum zero level, than in its previous incarnations. With less room to maneuver, the Fed's actions just don't have the same oomph they once did.
And now, the Fed has announced that they've gotten the message and are going to start "doing it right" and also buy Treasury securities, which will give this latest generation of QE more "oomph". Interestingly, they've also announced the economic targets that must be satisfied before they will discontinue the plan. All together, that suggests to us that they're thinking the future for the economy in much of 2013 will be somewhat worse than other official sources are letting on....
It looks like that as far as the pace of layoffs in the U.S. is concerned, the impact of Hurricane Sandy lasted for just three weeks.
Assuming that the volatility we've previously noted dies down, we should have enough data to begin projecting the new trend in initial unemployment benefit claim filings within a few weeks.
Suppose we converted a house to run entirely off the grid on green, renewable energy sources like solar or wind, so that we would never again have to pay an electric bill or generate any carbon emissions for the power it consumes, as President Obama would seem to desire all Americans do. What possible environmental harm would we cause by lighting it with the soon-to-be-banned 100-watt incandescent bulbs, which we might note are far more friendly for the environment and are much less costly than their CFL replacements? And if the answer is "none", why must we have the government progressively ban all incandescent light bulbs from production?
On a development note, we can't help but notice that if we combined the site traffic our tools for determining individual, family and household income distribution percentile rankings, they would collectively represent the most popular tool ever on Political Calculations. So guess what will be coming soon!...
And speaking of coming soon, here's our Christmas countdown clock!
QE has virtually nothing at all to do with helping the real economy. It’s almost entirely about enabling the insane current levels of deficit spending by our unhinged federal government.
Thanks a lot Fed for torpedoing ‘mREITs’, one of the rare remaining ‘buy and hold’ investments in this volatile headline driven market you have created ...