Heading disaster off at the pass? Short term election fix, that effectively, with regard to the structural issues of technological deflation and unemployment, “kicks the can,” or rather the electoral not a pot to piss in, “down the road,” a toll road to be sure. The biggest irony of QEIII, Bernanke’s pump, dump and suck strategy proving that the Fed can walk and chew gum and squirt tobacco and spit nickels at the same time, is the stated, ostensible purpose of creating employment and raising consumption. Perhaps very short term, but out at the end of the diving board is going to more jobs lost, more Artificial intelligence technologies employed, more robotics etc, which will create an additional crisis, a crest on new unemployed.
This, QEIII, operation Twist and Pout, seem more like electoral gimmicks: who cares about diplomatic personnel shredded by mobs, print money and all will be forgiven. Company creation would create a natural increase in the money supply, a real “velocity,” but this is not happening. The Fed, ultimately, has no interest in unemployment, strictly the solvency and viability of the banking system and only to this extent are the jobless worthy of consideration. Like John Wayne, Obama can walk off into the sunset, one last easy lay-up to the tune of Sweet Georgia Brown, a look over his shoulder, a knowing wink, and “hey everybody, so long and thanks for all the fish!” …
… what this means is the Federal Reserve Bank prints money and uses it to buy Treasuries, either at auction or from the secondary markets, such as the mortgage market: the banks balance sheets still have those famous “bad bank” loans on their books., the toxic debt. So, interest rates will be depressed, but will banks really start lending? It does mean there is less pressure to raise taxes, or wait for some economic growth….
Also, by pressuring interests lower, and increasing money supply, quantitative easing is theoretically economically stimulative; Bernanke is till trying to force people back into the stock market and out of fixed income, and with the pop in the markets it may happen to some extent, though Bernanke’s motivation may have been the risk of falling back into recession, Iran, Syria, Libya, etc. as sacrificial as they are, can’t keep the pyre burning forever.
But, If QE is such a panacea why don’t we do it automatically, and cut the suspense and pageantry out of the whole exercise. Make it banal. The answer is inflation; the U.S. can export its inflation for a while, but not forever. The risk they see is however, deflation, even worse, so QEIII is a deflationary medicine. What Bernanke does not fully get, is that investing in technology: everything from no servers at McDonalds to driverless cars is part of a process that is inexorable and which drives markets….
The American unemployment rate is staying persistently around 8%, well above if you count the workforce participation level. And the trend is up, so Bernanke’s projections are political cow dung….His 6% may be missing a “1″ in front of it. Obama wins, but is vilified as the worst chief ever….20% jobless rate. Its possible, even though real GDP may be moving higher, albeit not in a linear fashion. The income gap widening…
….Strong economic growth and high unemployment is a recipe for political disaster…..Obama knows this, but to admit it, the new reality, will be perceived as irresponsible. He opened up once about automatic bank tellers creating unemployment and the backlash was predictable. With this move by the Fed, QEIII, get your shovel ready. Romney is dead. The ground in not frozen yet. Easy digging….
(see link at end)…Rickards on China and QEIII: Coming in Sept.
…We need another rounding of quantitative easing to force China to revalue its currency and lift U.S. stock markets.The excellent Jim Rickards gives us a brief run-down on the way in which China’s response to the Fed’s tight moentary policy and creation of the fear trade over Europe will result in the next series of steps to allow QEIII to finally arrive for real.
Now, couple this with the other real problem of a world already awash in money, a rising tide swallowing all boats, as it were and this will send the markets and gold substantially higher, just in time for Obama to win in early November.
The Fed still has enough time to goose markets and employment data to serve the incumbent. But, they better be careful that they do not ignite a run-away inflation scenario if China and her trading partners continue to de-emphasize the dollar in their inter-national trade. At which point the Fed may have to reverse course swiftly and drain moey from the system, but only after the election is over….Read More:http://www.scoop.it/t/the-truth-behind-the-headlines