5 Yesterday I couldn’t help but tune in and feel disdain for this knucklehead on CNBC touting the euro crisis as stealth QE3, due to the increased demand for treasuries and lower rates. Off the top of my head, here are a few goals of quantitative easing:
Lower rates
Lower unemployment
Increased consumption
Demand for real estate
Demand for equities
How many of those goals are achieved by a deflationary vortex taking hold in the world’s largest economy? ONE. Deflation is not stealth QE3, no matter how low rates go.
5 Responses to “Euro crisis is stealth QE3? LuLz”
Mr. Cain Thaler
Yep, you’re absolutely right.
chivo
thank you my friend
jimmy_two_times
Good post Chivo.
Thats why the QE will come and the Fed will have to bid the treasury market as well. Bernanke doesnt want a repeat of 2010 when equities rose and so did rates.
leftcoasttrader
Was that really that much of a problem? Rates were at historic lows and got a bit of a bounce. I think it’s only natural to see a bounce at or near historic lows. Plus QE had been getting priced in for months at that point. A little selling of the news isn’t the end of the world.
Besides, at this point the Fed may have priced themselves out of the treasury market as direct buyers. Low rates have become ingrained, much like high rates were ingrained in the 80’s and stayed elevated even after aggressive measures were taken to get them under control. Structural changes are beyond even the power of the mighty Fed. Structural changes take time. When QE happens it’s going to be something a little more complicated that requires a little more explaining. Meaning, when it happens, everyone will know it.
jimmy_two_times
left,
yes rising rates are a problem, cost of borrowing for everyone rises, including government.
thats why Bernanake testified QE2 did not achieve the results he wanted. Without a housing rebound it will be a quagmire, hence rates will stay low for some time.