Fed Won't Admit it - But QE3 is Already in Force

[Chris]

Fed Won't Admit it - But QE3 is Already in Force
ETFguideBy Simon Maierhofer | ETFguide – 20 hours ago

The Fed telling us there is no QE3 is like a vegetarian eating short-rib ravioli or pork eggrolls. Just because you can't 'see' it doesn't mean it's not there. True, there is no QE3 (yet) in the form of QE1 or QE2. QE stands for quantitative easing and quantitative easing happens when a central bank buys financial assets to inject money into the economy. Even though it's not called QE3, the Fed is right now making billions of dollars available to buy financial instruments. We're not talking about Operation Twist here; we're talking about a covert operation that's essentially a U.S. bailout of Europe.

more................Fed Won't Admit it - But QE3 is Already in Force - Yahoo! Finance

[GlennO]

Been feeling this down to the soles of my feet! Thanks for the "Head's-up" Chris!

[FaithInChrist]

I was thinking, "what does this have to do with the air force"? then it's like "duh"!, man this headache is really getting to me. After further reading, yes, I believe this 100%. I'm with GlennO on this on.

[GlennO]

Browse: Home / QE3 Explained Simply
QE3 Explained Simply


By Currency on August 15, 2011




QE3, or quantitative easing 3, lingers in the back of investors’ minds.


Few investors seem to know exactly what quantitative easing really means.


We’ll take the time to explain it now.


QE3 Explained


Quantitative easing is a simple concept: a central bank “prints” money to buy long- and short-dated government debt. The goal is to drive down interest rates, boost demand for investment capital, and increase economic output.


Supply and demand are equally powerful forces in the currency and debt markets as they are in the market for shoes, toothpaste, or jelly beans. Increasing supply means lower prices. For currency, the price is not only the current price, but also the future price—interest rates.


Many think that quantitative easing 3 will never come. The Fed has agreed to make the market for dollars liquid with a promise to keep interest rates at 0-.25% for the next two years. That action alone should keep the price of money inexpensive enough to end all talk of QE3.


Effects of QE3


We can’t predict with certainty what the Federal Reserve will do to boost output, stave off deflation, and promote general economic growth. However, we can explain how QE3 will affect the markets, pending that it does eventually come:


Lower Treasury Yields – The Federal Reserve is authorized to buy US Treasuries with freshly printed dollars. When the Fed bids up the price of US Treasuries, the yield on US Treasuries moves down. This is true for any bond—price and yield are inversely-related.
Lower dollar value – By nature of any quantitative easing program, the Fed must create more dollars to buy up US Treasuries. Naturally, this results in a lower dollar value against other currencies, as the price of the currency is dictated primarily by supply and demand.


Inflation concerns – It happens every time the Fed acts to loosen monetary policy. Inflation remains low in the US, but a small group of investors worry that quantitative easing will lead to inflation. The reality is that the Fed would like to see inflation, since it has thus far failed to create any real measurable amount of it. Deflation remains a top concern.


Rising asset prices – Assets are priced into the future, whether we’re talking about stock prices, or the price for a barrel of oil. When the time value of money falls, investors can pay for earnings further out into the future. Bernanke made it clear his goal was to boost the financial markets, and that means giving lift to asset prices.


See? Economics doesn’t have to be difficult to understand!

QE3 Explained Simply

[GlennO]

Pundits fear 'perfect storm' despite official optimism


Jan 29 05:19 PM US/Eastern

Despite attempts by political and business leaders to suggest the eurozone has turned a corner, the prevailing view of pundits is things can only get worse and a "perfect storm" is brewing.

The five-day Davos forum which ended Sunday, was dominated by the sovereign debt crisis in the single currency zone and was held against a backdrop of frantic negotiations on a write-down deal between Greece and its creditors.


Some of the players most closely involved with the crisis since the 2008 financial meltdown insisted there was now light at end the tunnel with European Central Bank president Mario Draghi hailing "outstanding progress".


"Outlook Less Bleak From Alpine Retreat" was the assessment on the news pages of the Financial Times, suggesting the cool mountain air and pristine snow had raised the spirits of leaders more used to Brussels summits.


But, in an end of forum debate, experts predicted the break-up of the eurozone, economic malaise in the United States and a rise of militancy -- and then there are the consequences of a conflict over Iran's nuclear programme.


Nouriel Roubini, professor of economics at New York University, said the world might just about muddle through in 2012 but not much longer.


"2013 could be a perfect storm where you have a full eurozone crisis, where the fiscal problems of the United States come to a head and ... there is an investment bust and you have a hard landing in China as well," he said.

New York Times columnist Thomas Friedman had a similarly bleak forecast.
"I feel we will be back here next year and the hole will be that much deeper," he said.
Google executive chairman Eric Schmidt was among those who argued at Davos that globalisation had been a huge force for good, raising two billion people out of poverty.
But Friedman said the growing inter-connectivity meant the woes felt in one corner of the world impacted on everyone."If the world were a table with four legs -- the American economy, the European Union, the Arab world and China/India -- what strikes me right now is that all four legs are really shaking and they have never before been more interconnnected and interdependent," he said.


European leaders such as Germany's Angela Merkel and Denmark's Helle Thorning-Schmidt were among those who argued the eurozone crisis meant more integration was needed on the continent.


But Gideon Rachmann of the Financial Times warned of a potential backlash against the European Union and a rise of extremist parties as a consequence.
He raised the possibility that far-right wing leader Marine Le Pen could beat incumbent Nicolas Sarkozy in the first round of France's presidential election in March.
"You will see a radicalisation in politics," he said. "The potential for the unravelling, not just of the euro but the political structures which underpin the European Union, is really quite real."


Roubini said it was only a matter of time before the 17-nation eurozone started breaking up, warning starkly: "The eurozone is a slow motion train wreck. Not only Greece but other countries are insolvent.
"Probably not all members of the eurozone will be able to stay in the eurozone ... Greece (will exit) in the next 12 months, Portugal might take longer."
Perhaps second only to the eurozone, the issue that most exercised minds here was the possibility of Iran acquiring the nuclear bomb. Friedman said Israel was "keeping its options open" as its leaders regarded a nuclear-armed Iran as an existential threat to the Jewish state.


He said the US government had made clear to Israel it did not want to see it launch any attacks on Iran as "the consequences could be so unpredictable".
"The deepest, deepest American fear is that Israel would start a war with Iran that America could be forced to finish," he said.


And Roubini said a war with Iran would have devastating consequences for the world economy. "Oil prices would spike at least 50 percent and you would have a global recession," he said. "If we decide we are going to attack Iran let's think about the consequences."

Pundits fear 'perfect storm' despite official optimism