Friday, October 15, 2010

Bernanke Removes Any Doubts That QE2, QE3, QE4, QEN, Will Happen

Speaking in Boston tday, Bernanke lays down the cards. It is not only QE2, it's QE3, QE4, .., QEn, etc, as per post here a few weeks ago. The question is whether it will be $100B or $200B each month or more. Why gold drops on these news is bizarre (mst eb the verall negative tone of his remarks)

Fed's Bernanke Summary:
  • Inflation is too low, may stay that way for some time. At current rates of inflation, short-term real interest rates are too high. (this is so funny)
  • The risk of deflation is higher than is desirable.
  • Notes that evidence suggests that asset buying is effective in aiding the economy. Warns that balance sheet expansion is a risk to inflation expectations.
  • Fed needs to weigh the costs and benefits in deciding how aggressive to be with pace or size of any asset purchases.
  • High level of unemployment is cyclical, not structural. (excuses us Mr. Bernanke, it the population not aging?). Unemployment will likely persist for some time. Prolonged high unemployment poses risks to a sustainable recovery.
  • The economic recovery has slowed, growth will be fairly modest in the near term.
  • QE2 would have undesirable impact on inflation expectations. (Excuse us?)

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