With today’s Fed announcement of $600 billion more in Quantitative Easing purchases, the United States has officially entered “Stage II” of the crisis.
This $600 billion is in addition to the purchases already underway using the proceeds from the maturation of their massive MBS portfolio.
Goodbye dollar; hello future.
Here’s the relevant wording from the statement:
To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.
The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings.
In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.
The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
(Source)
Left unsaid here is exactly why the “pace of recovery” needs to be stronger. According to the BEA and the Census Bureau, the GDP and retail sales are up quite handily. The NAR says that existing home sales are picking up. Auto sales are coming in stronger.
Without the Fed being open about the true source of its concerns, we are left to speculate.
Whatever could be on their minds? Could it be:
- Is a Commercial Real Estate nightmare lurking in the shadows that could harm more than a few banks?
- Have certain foreign purchasers of US debt gone missing from the auctions?
- Are tax receipts at the federal level below expectations?
- Are banks more wounded than we’ve been told?
All we have at this point is uncertainty.
In the meantime, the information coming from China and India about growth and inflation have to be giving them fits…if the OECD doesn’t get itself up off the mat and back into the game, it risks being left behind on the final leg of the World Resource Race Twenty-Teen Open Invitational.
At any rate, the Fed is now openly pursuing a policy of outright debt monetization and funding of excess and excessive government spending. That’s a game changer.
Welcome to the future. It has finally arrived.
by osb272646 
