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March 10, 2011

3 Months From Now, US Fed Will Stop Buying

Filed under: Uncategorized — bigcapital @ 5:43 pm
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3 Months from now, US Fed Will Stop Buying.

Thursday, March 10, 2011 — http://marketpin.blogspot.com

== US Fed bond buys to finish, greenback and global stocks on radar ==

Fed’s Fisher warns could vote to stop bond buying

WASHINGTON (Reuters) – A senior U.S. Federal Reserve official warned on Monday that he would vote to scale back or stop the central bank’s $600 billion bond-buying program if it proves to be “demonstrably counterproductive.”

Dallas Federal Reserve Bank President Richard Fisher, who has repeatedly said he would not support any more bond buying after the program ends in June, said he was doubtful the purchases were doing much good.

“I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it,” Fisher said in remarks prepared for delivery to an Institute of International Bankers’ conference in Washington.

“The liquidity tanks are full, if not brimming over. The Fed has done its job,” he said.

The Fed launched its bond buying program in November to help an economic recovery that was struggling with high unemployment after the worst recession since the 1930s.

But since then, the economy has shown signs of strengthening with the jobless rate falling to a nearly two-year low of 8.9 percent in February.

Fed officials are due to meet March 15 to discuss the bond purchase program. In January, Fisher voted with the rest of the central bank’s policy-setting Federal Open Market Committee to continue it.

In comments to the bankers’ conference, Fisher said he did not feel that further monetary accommodation would help put more Americans back to work.

“It might well retard job creation, should it give rise to inflationary expectations,” he said, adding that perhaps the Fed’s policy has compromised the central bank by implying it is “a pliant accomplice to Congress’ and the executive branch’s fiscal misfeasance.”

== How About U.S dollar ? ==

Stretching out Treasury purchases past the end of June while reducing the monthly amount would help bond dealers adjust to the Fed’s withdrawal from the market, said Lou Crandall, chief US economist at Wrightson ICAP in Jersey City, N.J

NEW YORK – The Federal Reserve’s $US600 billion bond purchase program will be completed as planned, top Fed officials signalled, though they saw heightened economic uncertainty from unrest in the Middle East.

US central bank officials from Atlanta, Chicago and Dallas said they were keeping an eye on the risk higher oil prices could feed through into broader inflation, as well as their potential to hurt growth.

Atlanta Fed President Dennis Lockhart said he would not rule out more bond buys if the recovery dwindles. Dallas Fed President Richard Fisher said he would vote to end the program early if higher oil prices fed into broader inflation.

The program, announced in November to bolster a fragile economic recovery, is due to end in June. Since it began there have been signs the recovery is picking up steam.

Mr Lockhart, a policy centrist, said he was more concerned about the risk to growth from the oil price rise. He said he would be “very cautious” about increasing the size of the purchase program.

“Given the emergence of new risks, however, I prefer a posture of flexibility,” Mr Lockhart said.

He expected overall price pressures to remain subdued and warned it is too early to “declare a jobs recovery as firmly established”.

Mr Fisher, an inflation hawk, said he “fully expected” the $US600 billion program to “run its course.”

Mr Fisher told an international bankers’ conference he would vote to curtail or stop the program, however, if it proves to be “demonstrably counterproductive.”

The Fed meets on March 15 for its policy-setting meeting, at which it is expected to reaffirm its purchase plan. Fisher is a voter on monetary policy this year, Mr Lockhart is not.

In a CNBC interview, Chicago Fed Bank President Charles Evans said the Fed was closely watching rising oil prices, adding that they were “obviously” a headwind for growth.

Revolutions beginning in Tunisia and Egypt have spread to other countries in the region, including Libya and Bahrain. This has pushed the price of oil above $US100 a barrel, complicating the Fed’s objective of stimulating economic growth while keeping prices under control.

That said, Mr Evans pointed to the improving job market and said he expected economic growth of four per cent this year and next. He called the size of the purchase program “good”.

“I continue to think the hurdle is pretty high for altering our currently announced” program, Mr Evans, seen as a monetary policy dove and one of the most outspoken proponents for quantitative easing, said. Mr Evans does not have a vote on monetary policy this year.

Mr Fisher said the question will be whether the oil price rise is sustained.

“It is really a question of how that works its way through,” he said. “We have already seen very high gasoline prices. That’s one of the ways that it most affects the consumer.”

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February 23, 2011

What happens when Quantitative Easing (QE2) ends in June?

Filed under: Uncategorized — bigcapital @ 1:12 am
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What happens when Quantitative Easing (QE2) ends in June?

Wednesday, February 23, 2011 – http://marketpin.blogspot.com/

The Congress : “There is no need for us to support Quantitative Easing Part 3” confirmed by the Senate last week.

I remain surprised that in the business press there is little if any discussion about what will happen when Quantitative Easing II expires in June.

From a congressional standpoint, there has been discussion designed to force an early end to the program. Others have gone in the opposite direction mentioning a possible QE3.

In my view, the economy is slowly picking up. Deflation is less an issue, manufacturing activity is up, and consumers are spending a bit more. Corporate profits have exceeded expectations for Q4 2010.

On the downside, the housing market shows no signs of improving and might not have yet bottomed. Trouble in the middle East could disrupt oil shipments. China appears to be experiencing uncontrolled inflation and an asset bubble that is about to burst. Europe is experiencing continued sovereign debt issues. Some analysts believe that the UK is in stagflation. Commodity prices are increasing rapidly. Corporations have no pricing power. The US labor market will take years to repair. And finally, US Budget deficit is out of control!!!

This all points to a tenuous financial environment at the time of QE2 expiration. For 2011, YTD stock prices might be negative.

Any yet the business press seems quiet on this issue …

Read more: Count Down to Quantitative Easing Removal ends in June.

For 2011, YTD stock prices might be negative.

Which would be unlike the quantitative easing that the CABAL (Fed) have been subjecting our economy to… The CABAL chairman told us when he implemented QE1 and Q2, that it was for the good of the economy, to spur economic growth, job creation, and keep interest rates down… Well… That’s strike one, two and three… Go grab some bench, Mr. CABAL Chairman! And that’s all I can say about that right here, right now, as this is the kinder

Since the CABAL introduced quantitative easing in March of 2009, inflation has taken off, just as I told you back almost two years ago that it would… No, we’re not seeing wage inflation, or housing inflation… But get a load of these things that have increased phenomenally since March 2009.

The average price of gas is up 69%… The price of oil is up 135%… Corn is up 78%… Sugar is up 164%… And I could go on, but I think you get the picture. Now, on the other side of the employment that was supposed to improve with QE, the number of unemployed people is up 25%… The number of food stamps recipients is up 35%… The national debt is up 32%… And then the last thing they told us would improve or remain steady was interest rates… Hmmm… Well, the 10-year Treasury is up 100 basis points in the past three months alone! Sorry to be the one that had to tell you these things, but if you only watched cable media, you wouldn’t know about these things, and when the Conference Board called to survey you about how confident you were about the economy, you would be singing the praises of the CABAL for all they had done for you!

November 4, 2010

How will House Republicans wield their power?

Filed under: Uncategorized — bigcapital @ 9:58 am
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A teary John Boehner said voters want Mr Obama to “change course”

 Now that Republicans have taken control of the House of Representatives and have narrowed the Democrats’ advantage in the Senate, one of the biggest questions is: what does this mean for President Barack Obama’s agenda?

Just two years ago, in the giddy aftermath of Mr Obama’s historic victory, Washington DC pundits were writing obituaries for the modern Republican party.

Now Republicans are back at the table, and what’s more, they’re holding most of the cards. There are several possibilities for how they’ll play them.

Gridlock

The first – and most widely expected – scenario is for Washington DC to return to a state of absolute, fiercely partisan gridlock, a replay of the conflict ushered in by the Republican takeover of Congress in 1994, when Newt Gingrich became speaker of the House and ultimately shut down the government.

With control of the House, Republicans can block any legislation the White House pushes. Although they will not have the numbers to pass any of their own bills through the Senate alone, they can easily cause a stalemate.

Republicans who want to see Mr Obama hamstrung and struggling heading into 2012’s presidential election see this as the best option.

 Republican Senate Leader Mitch McConnell says his goal is for Mr Obama to be a one-term president

“The single most important thing we want to achieve is for President Obama to be a one-term president,” Senate Minority Leader Mitch McConnell said in an October interview, widely interpreted as a signal that he wanted the president’s legislative agenda to stall.

Over in the House, John Boehner, the man who is likely to hold the Speaker’s gavel come January, said recently in a discussion about his hopes to repeal Mr Obama’s healthcare reform bill that “this is not a time for compromise”.

Many commentators have taken statements like these to indicate that the Republican resurgence in DC will take existing partisan rancour to a new level.

But the signals from leaders are not so clear as they may seem.

Co-operation

Republican leaders know that if Washington remains a fiercely divided town in 2012, Republicans will shoulder their share of the blame in the eyes of the electorate.

Voters have given them a chance to clear the air in DC, and if they fail to do so, they stand a chance of being punished in the same way Democrats were on Tuesday. The Republican Party’s success in this election, disguises the fact that its poll ratings are at rock bottom.

 Florida Senator-elect Marco Rubio is a conservative who has worked with Democrats in the past

The influx of new members could also alter the dynamic in DC. New representatives may want to get the legislative wheels rolling so they can tout achievements in their home districts.

And although there are several extremely conservative, possible spoilers coming to DC – such as Pat Toomey from Pennsylvania and Rand Paul from Kentucky – some in this new crop of lawmakers are actually experienced politicians and skilled negotiators.

Rob Portman, the freshman senator from Ohio, formerly worked as President Bush’s chief trade negotiator. He is likely to work hard to form consensus on issues important to his rust-belt constituents, like trade and energy policy.

Florida’s new senator Marco Rubio is a bona fide conservative, but has earned a reputation in the Florida House of Representatives for working across party lines to get results. He could potentially become a pivotal voice, for example, in the debate over immigration, which is a huge issue in Florida and one that the Democrats want to deal with in order to appease Hispanic voters before 2012.

New faces like Mr Portman and Mr Rubio, along with freshman senators like former Republican whip Roy Blunt and former congressman John Boozman, may contribute to a second scenario where – with their eyes firmly on 2012 – both parties usher in new era of co-operation out of a desire to look productive to voters.

Even Mitch McConnell has indicated that co-operation may be possible under certain conditions.

In the same interview that he said he wants to make Mr Obama a one-term president, he stated that if Mr Obama “is willing to meet us halfway on some of the biggest issues, it’s not inappropriate for us to do business with him”.

But there is an elephant in the room with each of these scenarios: the Tea Party.

Unpredictability

The Tea Party gives rise to the third scenario: complete unpredictability.

Tea Party members like Rand Paul may not play ball with Democrats or Republicans

For starters, many Tea Party candidates – including Mr Paul – are not seasoned politicians. They don’t have long records which can be extrapolated to anticipate their voting behaviour.

Nor do they necessarily know how to work the corridors of power in DC to their advantage.

Often freshman representatives can be relied on to fall in line with party leaders. But this crop didn’t get nominated by being dyed-in-the wool Republicans. They got their positions by professing disdain for both parties, and with “politics as usual”.

For them, becoming reliable Republican foot soldiers could be as damaging as occasionally voting with Democrats. So they could end up forming an unpredictable swing group, lobbied by both parties.

Alternatively, they may bring Republicans and Democrats closer together, forcing them to negotiate because if neither mainstream party can count on the Tea Party caucus votes, they’re going to need each other if they are to get anything done at all.

Whichever scenario plays out – gridlock, co-operation or unpredictability – one thing is for sure: the American electorate is fed up with Washington and they are unafraid to dole out punishment regardless of party.

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