The Fed plays the nuclear QE trump card

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investorzzo's picture
investorzzo
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The Fed plays the nuclear QE trump card

f ten people who hear the same story or speech, each one might understand it differently. Perhaps, only one of them will understand it correctly. On July 21st, Federal Reserve chief Ben Bernanke was speaking in riddles, as central bankers are apt to do, while delivering his testimony before Congress. Each word that’s uttered by the Fed chief is scrutinized by anxious speculators, who try to interpret the message correctly before quickly placing bets in the marketplace.

Bernanke is the captain of a ship that is sailing through some very stormy seas, and is desperately trying to steer the economy away from its worst downturn since the Great Depression. The US-housing market is under water, and putting enormous financial stress on vast numbers of Americans. A record 270,000 US homes were seized from delinquent owners in the second quarter, and bankers are on pace to claim more than 1 million properties by the end of 2010. Small businesses, the engine of job creation, are largely cut off from credit and are sputtering.

Bernanke acknowledged that the US economy faces an "unusually uncertain time," but if necessary, he hinted the central bank would resort to "Quantitative Easing," (QE), or printing vast quantities of US dollars, in order to prevent a deflationary spiral. With the US federal funds rate pegged near zero percent, Bernanke was asked by Senator Jim Bunning if the Fed is "out of bullets," Bernanke responded, "I don’t think so. We are prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential and price stability."

http://www.financialsense.com/contributors/gary-dorsch/the-fed-plays-nuc...

investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Re: The Fed plays the nuclear QE trump card

Why more Quantitative Easing can’t be avoided

http://www.financialsense.com/contributors/julian-phillips/why-more-quan...

tictawk's picture
tictawk
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Joined: Aug 24 2008
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Re: The Fed plays the nuclear QE trump card

all this is assuming that the Fed IS still in control even though there is plenty of evidence that the Fed has lost control. 

I am reminded that nobody is bigger than the markets and with that in mind I wonder what will transpire next to prove that theory.

Clearly the bulls are buying in anticipation of QE2 so perhaps the "buy the rumour, sell the news" might apply. 

My gut feel is that this rally is technical in nature and the puppet masters are trying to break out the indexes over the June highs before it all falls apart.

On the fundermental side here are some questions 1) Is the Fed the untimate master or are the markets too big?  2) Can the Fed get away with destroying debt that they helped create with QE2 again?  My gut feel is NO

 

 

 

 

investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Re: The Fed plays the nuclear QE trump card

Update interview with Jim Rickards on Government strategy to start up QE again.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/8/2_Ji...

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