Sep

20

With the real estate market improving, stocks up, bonds up and unemployment declining (small but better then increasing), why did the FED decide to go forward with an unprecedented unlimited QE program?

My speculation is it's related to recent animosity of the republicans toward the FED and its future existence. By driving markets higher and driving mortgage rates lower via directly buying 1/3rd of the new issue MBS each month, the FED is helping to ensure Obama stays for a second term, helping to further diminish the threat of the republican party on the FED's autonomy and power. With no fiscal stimulus coming from the democrats they will need the FED more then the republicans. So perhaps the real reason for QE unlimited is self preservation.


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2 Comments so far

  1. david higgs on September 18, 2012 12:43 pm

    We have reached the point in time ( as probably reaches by many civilizations before us )where our Politicians have become so self serving at the cost of it’s citizenry that little recourse exist to to take up arms.

  2. John on September 20, 2012 12:08 am

    Maybe I’m naive. In some cases I still am but do not believe I am in this opinion: ‘Big B’ is not being political here. I do believe one thing one would treasure in this position is power, especially the power to exercise one’s mandate of independence (see any surprises in the Supreme Court lately?). He is actually (hard to believe as it is) doing what he thinks is the right thing to do.

    I also don’t think a (former) Fed chairman would neglect to exercise that right in the face of opposition from a hopeless hack like Romney or anyone else . . . the dude is gonna do just fine either way and what would be the point of keeping the job if he had to become partisan?

    I also believe QE3 was one of the stupidest Fed decisions in recent memory (and I’m oldish so recent to me is farther for others).

    I believe the so called ‘fiscal cliff’ is EXACTLY what this country and the planet needs — so you can discount me as a nutter right now if you wish, I’m well aware that the market is pooping its panties about that prospect.

    But, if you WERE to go in for more tax-breaks for the ‘job creators’ who (based on Romney’s supposed but not able to be verified returns)pay ~15% in taxes and expect me to believe they would REFUSE to create more jobs if they paid 25% on 230 million and also supported reduced spending (which should, but never will be, in the military not in social support structures) yet believed the Fed should carry the weight of keeping us on track through its actions . . . well then what we all need (and that includes me in the we, I’m riding this central bank induced Bull all the way to the bank too while it lasts, which I give 3-6 months) is for the Fed to say, “Listen High Wall Street and Lowly Main Street, interest rates are going up 100% every 6 months for the next 18 months”.

    THAT is the message that would kick in home purchases and the theoretical hardwood floors, gas stoves, titanium fridges, and vodka-filled jacuzzis to follow. THAT is what would induce folks to get their butts in gear and start buying shtuff.

    That’s not all that we need though. What we need is higher-taxes and more government spending on social programs. Fiscal cliff or no fiscal cliff. That’s the hard long truth we need to face to account for all of our well-paved roads, utilities that function 23/6, kick-butt schools, cruise missiles, BMW’s, and vodka-filled jacuzzi’s. It was mostly bought in credit and it is time to pay the bill.

    I’m also just saying that to suggest ‘Big B’ is being partisan is inaccurate. He is just being, pardon me, a Nimrod.

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