QE3 Addicts Scour FOMC Meeting Minutes Looking for Their Fix

Quantitative easing is the buying of various securities to increase the money supply. In a round about way, this increases liquidity at banks, stuffs them with capital, which theoretically banks are then supposed to turn around and increase lending to regular people.

The amount of text written on FOMC meeting minutes is astounding. This is a conversation from a meeting almost a month old where no action was taken. In a game of Where's Waldo, people pour over the words, hunting for even a trace of more quantitative easing. This time they found it and pounced.

Here is the latest FOMC meeting minutes phrase that has quantitative easing addicts salivating and foaming at the mouth.

Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.

The problem, with this is taking comments out of context from meeting minutes. Some economic indicators improved after July 31st for one and the Fed is concerned about deterioration. Right after the above sentence is this:

Several members noted the benefits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action. One member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. At the conclusion of the discussion, members agreed that they would closely monitor economic and financial developments and carefully weigh the potential benefits and costs of various tools in assessing whether additional policy action would be warranted.

In other words, beyond giving commodities traders and Gold bugs a buzz, for quantitative easing increases commodities prices, what really were the effects of the previous two rounds?

Creating a commodities bubble may be good for Wall Street, but the problem is Main Street. Unemployment is the crisis of our time, quantitative easing so far hasn't made a dent. Quantitative easing simply isn't the right policy prescription for the ills of the U.S. economy.

From the FOMC meeting minutes we see questions on what good quantitative easing really does.

Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. In addition, some participants noted that a new program might boost business and consumer confidence and reinforce the Committee's commitment to making sustained progress toward its mandated objectives. Participants also discussed the merits of purchases of Treasury securities relative to agency MBS. However, others questioned the possible efficacy of such a program under present circumstances, and a couple suggested that the effects on economic activity might be transitory. In reviewing the costs that such a program might entail, some participants expressed concerns about the effects of additional asset purchases on trading conditions in markets related to Treasury securities and agency MBS, but others agreed with the staff's analysis showing substantial capacity for additional purchases without disrupting market functioning. Several worried that additional purchases might alter the process of normalizing the Federal Reserve's balance sheet when the time came to begin removing accommodation. A few participants were concerned that an extended period of accommodation or an additional large-scale asset purchase program could increase the risks to financial stability or lead to a rise in longer-term inflation expectations. Many participants indicated that any new purchase program should be sufficiently flexible to allow adjustments, as needed, in response to economic developments or to changes in the Committee's assessment of the efficacy and costs of the program.

The real problem here is Congress and this administration. Policy to get people back to work is what's needed and that is something Congress or this administration won't make their top priority or worse, claim policy which will actually cost jobs somehow would create them.

More quantitative easing will simply increase the value of assets, increase equity prices, devalue the dollar a tad, increase inflation and decrease real interest rates. That clearly doesn't do much for Main Street in terms of getting them a job. To wit, again from the FOMC meeting minutes:

A number of participants indicated that such rules have played a useful role in informing the Committee's monetary policy deliberations. However, several participants pointed to specific considerations--including the possible mismeasurement of unobservable variables, such as potential output, and uncertainty about the appropriate economic models to use in estimating the magnitude of those variables--that might limit the usefulness of simple rules both internally and in public communications. Several participants saw value in examining the performance of rules across a range of economic models. Participants discussed the case for making adjustments to the prescriptions of simple policy rules in the current circumstances to take into account various considerations such as the effective lower bound for the federal funds rate, the effects of the Committee's balance sheet policies, and potential shifts in the dynamics of the economy.

Most policy makers refuse to acknowledge globalization's negative impact on the U.S. worker, or that labor arbitrage is coming home to roost. Improving macro economic models to capture some of these events, consequences would be most welcome. The statistics are there, but few analysts bring those facts to light in order for policy makers to see how America's disposable worker syndrome is literally bringing down the globe's largest economy. The middle class has been squeezed, tapped out, sucked dry to the point it has negatively impacted the United States overall economy and future.

Bottom line, quantitative easing isn't doing anything to get Joe Blow a solid, good paying job with disposable income and benefits.

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"Free market" banksters need their govt. fix. . .like addicts

Come on, banksters need it, they need it, just give it to them. Otherwise they might not get their $20 million bonuses and who knows what might happen to the megayacht builders then (Fox covers them sometimes - they ignore destitute Americans for some reason). But megayacht builders might suffer . . . ignore the tens of millions of people in poverty, think of those 200'+ yacht builders.

Pathetic banksters, spewing all that shite about free markets, capitalism, Ayn Rand. Push comes to shove, these banksters sit on the bankster-owned Fed, borrow $ backed by taxpayers (FDIC) and loan it out at anything but 0%. The Fed, the crackdealer of all crackdealers, is owned by the banksters, so when the addict controls the dealer . . look out! Expecting Dimon to give up his seat on the NY Fed Board (for derivative bets and losses, price-fixing commodities, overcharging and foreclosing on soldiers, MF Global theft with Corzine, etc.) is like expecting a drug addict to give up his job at a meth lab - ain't gonna happen. In 2012 the entire world not watching the Kardashians and Blue vs. Red propaganda realizes the banksters have control of free money, dictate fiscal and monetary policies, and all the QE and ZIRP to the moon results in exactly 0 job creation but inflation (and losses to those depending on fixed incomes like the injured, elderly, disabled vets, etc), 0 job growth (except for coke dealers and prostitutes), but those boys can buy more coke, more yachts, and more duplexes in Manhattan, and that's all that really matters to the 30 million unemployed, isn't it? And with all that loot, they can siphon off their bonuses and salaries, inflate Manhattan real estate prices, buy a new Van Gogh (who would take a dump on banksters if he was alive today), and Bravo TV can create more shows showing how good Americans (i.e., the 1%) have it.

No tax revenues as Americans can't find jobs so asswipe politicians demand the people they helped force into unemployent now suffer more as they cut social aid, brilliant Americans that could cure AIDS, diabetes and cancer, now living in tent cities and viewed as unemployable. Vets trying to convince Home Depot HR that they are qualified to stock shelves (WTF?). Prosecutors that could tackle banksterism watching as banksters help terrorists. Teachers and nurses raiding their pensions to pay rent and try to survive for 40+ more years. But Fox News and Forbes and CNN Money and politicians of all stripes continue to push this "less regulation, less taxes, more free money to banksters = job growth."
Hey, assclowns, there's NO JOB GROWTH. NONE. We need massive jobs programs that just don't build highways for select few contractors or keep police in this city or that city employed. We need to punish those that enjoy the protection of being incorporated in America but do everything they can to destroy Americans through outsourcing and visa abuses (if you want to enjoy the protection of America's laws and our government, then you will share in our burdens as well - Lesson #1). We have scientists, engineers, attorneys, researchers, machinists, artists, vets, doctors, etc., etc. dying out here because of your actions and inaction who desperately want, and need, living wage jobs. Dying. Stop your lies and your endless delays. Every honest study in the world is showing the middle class is being hollowed out purposely. Fewer taxes for the 1%, less regulation for the 1% (like the repeal of Glass-Steagall and the outsourcing of every job known to man + open borders) is killing Americans. Every time these people talk and push the same 1% agenda millions more needlessly suffer. But hey, they don't care, they're rich and corrupt and it's time to take a cruise on a megayacht with Bloomberg and Corzine and Geithner with some Colombia snow (imported with the help of Wells Fargo/BOA/Standard Chartered/HSBC/and other bankster money launderers) and escorts -just don't bring Big Gulps - those are bad for you.

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Pushing Hard on the Interest Rate Rope

So, if I read the Fed Minutes correctly, the Fed's big idea is to lower interest rates further. We are below the rates of 1932 on almost every key interest rate. Who wins with rates this low? Don't say mortgage debtors or car buyers because at these rates the banks, or car dealers get incredibly picky. Fed goons will not say, buy up mortgages like the New Deal, or build something useful and productive.

Bank arbitrage is the most likely motive. Borrow at near zero and then speculate. It no longer matters if nobody will buy CDs or MM funds, the Fed will step up. Then, of course, you get your head in the hog troth table of speculative nstruments.

Banks will take the Fed money at zero, create almost no value
and everybody but the banks loses. As long as we tolerate the BS. The Crisis, and the Struggle continues.

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Burton Leed

not savers that's for sure

Debtors save but savers are crucified with low interest rates. The lending standards for mortgages are way too tight, but if one gets a mortgage, you can finance a much larger home price. The idea is to flow money so more lending happens, inflation stays mega low with this never ending idea that is lending is increased somehow that's going to eventually wind it's way down to more hires, increased demand.

If I had to bet the farm at this point, I would place my bets that QE3 will not happen and the reasons are because oil is already through the roof, a key element for our economy, high oil prices are correlated to recessions and it's not getting people hired. That's the biggest crisis the U.S. has, it's not the stock market, equities, commodities, deflation and so on, it's demand, hiring, labor, employment.

Gold right now is soaring and frankly I think they will be disappointed. We'll see but I'll place bets that Bernanke's Jackson Hole speech moves from subdued to much more explicit reaming of this administration and Congress for that's where we need direct jobs policy, stop offshore outsourcing, limit the use of foreign guest workers, reduce illegal labor, major tax incentives tied 100% to direct hires, the list goes on and on. Bernanke of course won't endorse these ideas but I'm willing to bet it will be about the fiscal cliff, the need for more types of these direct job incentive programs and so on.

It's not going to be a speech and indicator that magically the Fed should increase their balance sheets even more and extol the wonders of quantitative easing. QE at this point is Wall Street crack.

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My Only Semi-Sane Bet is REITs

REITs could collapse with another global recession. That said, at this time there is no other investment paying north of 10%. Forget gold, unless GOP gold bugs take over. Gold is high by historic standards, commercial real estate is low. More important, rents are still high. Forget stocks for 5 years (according to Warren). Bonds and all debt instruments pay nothing. In a global slow down, commodities are bad bets.
We called oil price softness at the beginning of 2012.

Disclosure. When my favorite VP Dickster Cheney started Iraqi
Fever in 2002, I bought gold. A no-brainer.

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Burton Leed