Follow Me @


Tuesday 28 January 2014

The Federal Reserve Letting Americans Know The Depth Of The Economic Problems?

The Federal Reserve (Fed) announced a third round of money printing, or Quantitative Easing 3 (QE3).  This round of money printing has a dramatically different twist and message attached to it, as it has no expiration date or limits. 
Clearly, the Fed’s stated objective of a sound currency is now taking a back seat to stimulating the economy.  

Today, the question remains whether or not this latest attempt to stimulate the economy will work, or will it be remembered as just another desperate attempt by the Fed to save a broken system.

The outlined plan of QE3 states that the Fed will purchase at least $40 billion worth of mortgage-backed-securities each month until unemployment numbers are satisfactory. 

 It is interesting that they have not defined what a satisfactory level of unemployment is, but based on historical statements released by the Fed, they are likely looking for levels somewhere between 5% and 7%. 
Many are calling this QE program, QEternity due to the lack of end date and limits on the program. 

Open-ended money printing could be considered positive from the perspective of stock markets, since the message delivered by the Fed is clear that they will do whatever necessary to prop markets up, and continue the illusion of recovery. 

Interestingly enough however, markets to this point have actually seen declines since the announcement.  Major US indices are down between 6 and 8% in the two months following the announcement, despite prior consensus that prices would rise like they did following QE1 and QE2.  

Read More: The Federal Reserve Letting Americans Know The Depth Of The Economic Problems?

Thank you 

Ziad Abdelnour 

No comments:

Post a Comment