Forbes (September 9)
“There is a country that, more than any other, needs the Federal Reserve to embark on QE3.” A third program of quantitative easing “may not help the U.S., but China certainly stands to gain.” QE3 is expected to weaken the dollar. “A weak American currency means a weak Chinese one, and a weak Chinese currency helps the nation’s struggling exporters on global markets.”
Institutional Investor (September 5)
GDP targeting may be “the real message from Jackson Hole.” At this annual meeting of central bankers a paper presented by Michael Woodford advocated GDP targeting. “The Fed has already promised to keep rates low through 2014, but if it were to switch gears, it would instead promise to keep rates low indefinitely, until nominal GDP, or GDP adjusted for inflation, was showing clear signs of a recovery.”
Tags: Central bankers, Fed, GDP targeting, Inflation, Interest rates, Jackson Hole, Michael Woodford
Financial Times (July 8)
“If the eurozone did not exist, the world would be focused on America’s recovery problem.” With unemployment so high and Treasuries so low, Congress should be utilizing fiscal stimulus. Since they’re not going to, the Fed should step in with quantitative easing. “Last month’s jobs report confirmed that the US recovery is stalling for the third year in a row….The case is now strong enough for the Fed to embark on a QE3 asset-purchase programme at its next meeting at the end of July.”
Barron’s (June 11)
“The second half of the year promises to be an adventure.” The 10 financial wizards of Barron’s Roundtable “expect the Federal Reserve to launch a third round of quantitative easing, or Treasury-bond purchases, in an effort to juice the economy and rouse the somnolent job market. But they don’t expect that to do the trick.” Moreover, they harbor concerns over the world financial system, given the massive debt held by industrialized nations. To weather the storm, “the consensus among our experts is to stick with companies that have good businesses, savvy managers, healthy balance sheets, and low valuations. Preferably, they also pay dividends and buy back shares.”
Bloomberg (June 8)
“The Fed ought to get off the fence…. Bernanke and his colleagues should decide on a new program of monetary easing…. We think the case is stacked pretty strongly in favor of more quantitative easing— the Fed’s unorthodox (and controversial) method for driving long-term interest rates lower by buying government debt.”
Tags: Bernanke, Debt, Fed, Interest rates, Quantitative easing, U.S.
Bloomberg (September 23)
Even though the Federal Reserve has kept interest rates low in an attempt to reduce strain on the housing market, the number of households speding an excessive amount on mortage payements has continued to rise. This “persistent stress in housing” illustrates “one of the main problems with the Fed’s attempts at monetary stimulus: Many borrowers simply can’t take advantage of lower mortgage rates, because their income has fallen, they owe more than their homes are worth, or they shouldn’t have qualified for a mortgage in the first place.”Even though the Federal Reserve has kept interest rates low in an attempt to reduce strain on the housing market, the number of households speding an excessive amount on mortage payements has continued to rise. This “persistent stress in housing” illustrates “one of the main problems with the Fed’s attempts at monetary stimulus: Many borrowers simply can’t take advantage of lower mortgage rates, because their income has fallen, they owe more than their homes are worth, or they shouldn’t have qualified for a mortgage in the first place.”
Bloomberg (September 14)
“European banks are losing deposits as savers and money funds spooked by the region’s debt crisis search for havens, a trend that could worsen economic and financial conditions.” Deposits dropped 40% at Irish banks during the past 18 months, but the trend is affecting Greek, German, French, UK and Spanish banks as well. In turn, banks are showing a clear preference for the perceived safety of the Federal Reserve over the European Central Bank. “The cash that foreign banks keep at the U.S. Federal Reserve has more than doubled to $979 billion at the end of August from $443 billion at the end of February.”
“European banks are losing deposits as savers and money funds spooked by the region’s debt crisis search for havens, a trend that could worsen economic and financial conditions.” Deposits dropped 40% at Irish banks during the past 18 months, but the trend is affecting Greek, German, French, UK and Spanish banks as well. In turn, banks are showing a clear preference for the perceived safety of the Federal Reserve over the European Central Bank. “The cash that foreign banks keep at the U.S. Federal Reserve has more than doubled to $979 billion at the end of August from $443 billion at the end of February.”
The Economist (August 27)
The U.S. economy is missing the usual drivers of an economic recovery, but it is equally missing the usual triggers of a recession. Whether the U.S. double dips or not will depend on the generally competent Fed, an unpredictable Congress and quite a bit on luck. In the end, there may be little difference between weak growth and a weak recession. “Although the absence of obvious imbalances or financial strains does not eliminate the risk of recession in America, it does militate against a long, deep downturn. Indeed, it may be hard for most people to distinguish a shallow recession from lacklustre growth.”
New York Times (June 12)New York Times (June 12)
Chairman of the Federal Reserve Ben Bernanke stated “growth will recover later in the year as gas prices fall and the effects of the Japanese tsunami fade.” “Too-easy,” the Times says of his answer. “Even if temporary setbacks were to blame, the economy’s inability to take hits without backsliding is a sign of underlying fragility.” Big federal budget cuts should be delayed while measures to stimulate the economy, like job creation and mortgage relief for homeowners, should be undertaken.
Chairman of the Federal Reserve Ben Bernanke stated “growth will recover later in the year as gas prices fall and the effects of the Japanese tsunami fade.” “Too-easy,” the Times says of his answer. “Even if temporary setbacks were to blame, the economy’s inability to take hits without backsliding is a sign of underlying fragility.” Big federal budget cuts should be delayed while measures to stimulate the economy, like job creation and mortgage relief for homeowners, should be undertaken.
Wall Street Journal (April 21)
The Journal argues that the Federal Reserve should act more as a global central bank. “The dollar is the world’s reserve currency…. Yet for at least a decade, and especially since late 2008, the Fed has operated as if its only concern is the U.S. domestic economy.” The result has swamped countries trying to battle inflation with huge capital inflows. Domestic repercussions will also emerge. The Fed has single-mindedly expanded the money supply to stimulate the economy. “The bill is coming due in a weak dollar, food and energy inflation, and the decline of U.S. economic credibility.”
Tags: Economy, Fed, Inflation, Reserve currency, U.S.
