Monday, November 23, 2009

Ignorance Is Bliss-11/23/2009

Re-Blog via Bloomberg:

What is the fate of Quantitative Easing? Today Federal Reserve Bank of St. Louis President James Bullard claimed the Fed should expand on QE past March. “Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in,” Bullard said.

Additionally he stated, “If the economy came in very weak, let’s say, in 2010, weaker than expected, we would have the option of doing further quantitative easing” through additional asset purchases. “If the economy came in stronger than expected and inflation expectations started to ratchet up a little bit we could maybe sell off some of these assets and remove some of the accommodation from our quantitative easing program.”

Bullard also explained, The FOMC is not averse to hiking interest before unemployment cools, “We know the economy changes over time. Everybody’s got very strong opinions and takes the role very seriously. I don’t think anybody would feel bound just because we behaved.”


Naturally, I am not sure what message the Fed is trying to convey to open markets. Every FOMC meeting of recent memory has lacked any type of clarity on interest rate policy. Yet Bernanke, Summers, and Geithner remain to back a strong USD.

On top of all this political banter Ron Paul's bill to regulate the Fed appears to have legs. As I have discussed with my partner Alex, The Fed is split. There is no unification. A disjointed front leads to two things: 1. Power Struggle 2. Defeat.

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