Thread: Quantitative Easing Engine Revs, Car Goes Nowhere

Tuesday, September 28, 2010

QE Engine Revs, Car Goes Nowhere

The economy is stuck in neutral so stepping on the QE gas pedal is highly unlikely to accomplish much except increase the noise level. Yet, the philosophy at the Fed seems to be, if gas doesn't work, give the engine more gas.

So the engine continues to rev louder and louder, and treasury yields drop, but that does not and will not put Americans back to work.

5-Year Treasury Yields at All-Time Low

Curve Watcher's Anonymous notes Treasury Five-Year Yields Near Lowest Since 2008 Before Auction http://noir.bloomberg.com/apps/news?pid ... ix5o674W3k

Treasuries rose, pushing five-year note yields to the lowest level in almost two years before today’s auction, as a drop in consumer confidence spurred bets that the Federal Reserve will increase debt purchases.

Bonds also advanced as an official said the Bank of England should step up quantitative easing and Standard & Poor’s said the price of bailing out nationalized lender Anglo Irish Bank Corp. could exceed $47 billion

“The engine is revving, but the car is going nowhere,â€

Why QE Money Printing Does Not Work, QE2 Impact on Stock Market Sectors

Stock-Markets / Stock Markets 2010
Sep 28, 2010 - 04:16 AM

By: John_Mauldin

Everywhere I turn is another article about Quantitative Easing Part 2. Will they or won’t they? My question last week was will it make any difference? After I sent my letter out, I came across this missive from the always fascinating Ed Yardeni. I like to read Ed because he is not afraid to take an out of consensus call. He is his own man, something of a rarity in the world of economists.



He highlights a report from the Fed on the problem with the money multiplier. It has gone away. (Really? You think?) If you took Econ 101 this was a basic staple.

He writes: “Fed officials are clueless about how quantitative easing is supposed to impact the economy. They aren’t even sure if it has any effect on the economy. The Fed study cited here confirms this known unknown.â€

Ambrose Evans-Pritchard Apologises for Being Wrong on QE and Stimulus Spending

Economics / Quantitative Easing
Sep 28, 2010 - 05:40 AM

By: Nadeem_Walayat

Ambrose Evans-Pritchard the head economic poncho at the Telegraph now nearly 2 years from starting his mantra of deficit spending stimulus to prevent a debt deleveraging deflationary depression turns around and says that he has been wrong all along, that central banks such as the US Fed are focused on creating inflation rather than preventing deflation.

It took Ambrose Evans-Pritchard 2 years to realise this ?

Way back in November 2008 in an in depth analysis (28 Nov 2008 - Bankrupt Britain Trending Towards Hyper-Inflation?), http://www.marketoracle.co.uk/Article7526.html I specifically highlighted the flaws in the economic theory of the likes of Anatole Kaletsky and Ambrose Evans-Pritchard -

Those that advocate and support the borrowing binge in the mainstream press such as Anatole Kaletsky and Ambrose Evans-Pritchard need to take a look at the real value of their savings, properties and stocks, for they can subtract a further 20 to 30% loss of value over the last 12 months!, and there is more to come, much more, especially if the government takes the whole of banking sectors liabilities onto its books as Iceland was forced to do!

Starting with the sensible economics, the Chancellor is right to cut taxes and to spend and borrow through the recession, undeterred by rising deficit projections and the build-up of public debt. The main reason comes down to a simple proposition that almost nobody in politics seems to understand: for every saver there has to be a borrower.

Hysterical claims that Britain is on the brink of “national bankruptcyâ€