Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co, says the Federal Reserve Treasury purchases will probably not lower unemployment, while it will cause global inflation. He added that QE (Quantitative easing), will not be enough to deliver high economic growth.
Goldman Sachs estimates the next round of QE (QE2) at $2T. Then there may be QE3, QE4, etc, really devaluing the USD dollar for good.
In addition, he commented on the huge, record amount of U.S. debt, saying it is another problem for the economy.
“One thing that the Fed cannot do is stand still, it is terrified of deflation,” “QE on its own means we’ll have the same issues in six to nine months time with the rest of the world being inflated.”
“If I were to design the right policy response and implement it, it would be a package that would include structural reforms making us more competitive and the economy more flexible, more safety nets,”
On commodities, he says that new QE measures and Treasury purchases will drive commodity prices even higher "as much of the money added to the U.S. economy spreads to other nations".
Of course, the Fed is now in an impossible situation that it itself caused. It pretty much announced QE. If it does not deliver, the markets will crash. And QE will likely not work.
Actual interest rates too high
By buying more bonds and treasury assets the objective is to lower real rates. Although nominal rates are very low, because there is zero inflation, or even deflation, the actual interest rates are too high. The Fed wants to increase inflation and therefore, reduce the cost of borrowing in real terms.
"The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower".
Negative Yield
The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction yesterday as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.
Got commodities?
Tuesday, October 26, 2010
El-Erian: Fed's QE Will Not Lower Unemployment And Will Cause Commodities to Rise
Subscribe to:
Post Comments (Atom)
Blog Archive
-
▼
2010
(1051)
-
▼
October
(125)
- Roubini Loses Cool; Gloves Are Off
- Roubini: U.S. Heading for Fiscal Train Wreck, QE W...
- Brazil's New Giant Sweet Light Oil Field: PBR
- Brazil To Announce Its Largest Ever Light Oil Disc...
- General Electric Straddles
- Poor HAL Being Blamed for BP Spill: Next The Dog; ...
- McDonalds to Indemnify Manager Because He Gained 3...
- First Nations of Saskatchewan Preparing Big for PO...
- The Fed In An Impossible Situation: Now Acting By ...
- Europe Financial Problems Escalate, Again, To Hit ...
- Options for BCE Earnings
- Bill Gross Warns: QE2 May Not Work; Fed's Ponzi Sc...
- Currency Wars: South Africa Warns and To Take Meas...
- Manulife Advises Clients to Head For Cash; Fed's Q...
- More Greek Tragedies To Bring Euro Down: Greece's ...
- Currency Wars: Greek and Portuguese Yields Soar, T...
- The New Norm: 50-Year Bond for Goldman Sachs
- KRY, Crystallex, Quiet For Too Long
- Government Conceals $40B In AIG Losses
- El-Erian: Fed's QE Will Not Lower Unemployment And...
- AAPL, Apple's New Balloon Computer
- Thousands of N.Y. Foreclosures Riddled With Flaws;...
- List of Countries the U.S. Wants Punished
- Profitting From Euro Moves, France Chaos, and U.S....
- The World of Wild Currencies: Aussie Dollar Stradd...
- G20 (Actually G19) Meeting: Green Light To Sell th...
- Currencies Wars: Brazil Now Seeks Applying Income ...
- Pele: The $1B Man - As Great As Ever
- Germany Says U.S. Printing Money is Currency Deval...
- PBR: New Giant Oil Field's Production to Rise to 1...
- G20 Pledges Not To Devalue Currencies, i.e, Not To...
- Skype and Internet on Your TV
- The Dreadful VXX and UNG ETFs, And Very High Corre...
- The US Dollar Index: Tracking Live Through ETFs
- Brazilian Election Results in U.S. and Canada Show...
- American Express Earnings Disappoint: The Rich Are...
- Gold Acts Leveraged Versus The US Dollar: Watch Ou...
- Beware When People Refer to The US Dollar Index
- UNG Loses on Average 8.37% Per Month
- Brazilian Unemployment Lowest in 8 Years at 6.2%: ...
- Crazy Activity in Bank of America Long Term Options
- Currency Wars Straddles Update, The More Currency ...
- BAC Crash: Profitting From Bank of America Rising ...
- Technical Analysis: 17 Money Making Candlesticks F...
- Why Gold Dropped So Hard
- Roubini: Growth to Slow to 1%, House Prices Still ...
- U.K.: 1 in 10 Public Sector Jobs To Be Cut
- Gold is Dead
- Profitting From the Currency Wars: Yen, Yuan, Auss...
- Violent Moves in Gold and Oil: Profitting From Gol...
- Unemployment As Measure by Gallup Is Much Higher T...
- Fed's Fisher: We Cannot Accept Being the Least Wor...
- IBM Drops Hard on Bad Earnings: Oddities
- Bond Short Term Yields Go Down, Long Go Up
- Why Currencies Appreciate: Global Interest Rates -...
- Currency Wars: Geithner Says Devaluing Dollar is N...
- Currency Wars Escalate Worldwide: Brazil Fires New...
- Why Deflation is So Bad: Japan and the Future For ...
- May Day, May Day, One Currency Going Down
- Chilean Rescue: The Bravest Man on Earth
- Bernanke's QE2 Needs More Than $1T To Succeed
- Bernanke Removes Any Doubts That QE2, QE3, QE4, QE...
- Braskem, Brazilian Leader in Chemicals Returns +342%
- Roubini: How to Avoid the Double Dip; U.S. Increas...
- Perfect Portfolios, Tracking Their Buy and Sell Si...
- China: By Devaluing The Dollar U.S. Internationali...
- China: Without Weak Currency the U.S. Has No Hope ...
- Foreclosures Still Soar in the U.S. to 102k+
- Chile's Success: 33 Up, 0 Down
- Chile's Super Mario Rescue
- Wild Currencies Update: Where the Volatility and O...
- Chilean Miners To be Rescued in 2 to 4 hours: Cana...
- After FOMC Minutes: Will the Bank of Japan Act Aga...
- The Yen at 7AM
- Currency Wars: Japan to Take Bold Action Against R...
- Canadian Flag Seen on Rescue of Chilean Miners
- Currency Wars: Meeting Ends in Disarray, Global Ec...
- Ontario Teachers Pension Plan To Bid for Potash Corp.
- The Chilean Miners Rescue Explained In Images
- Chilean Rescue: T-130 Drill Successfully Reaches M...
- Remarkable: Rescue Tunnel Reaches Chilean Miners T...
- The Wild, Wild World of Currencies
- Full Speech; What Bernanke Really Said: Public Fin...
- Fed Needs to Punp Another $6T or $7T To Have Any M...
- Currency Wars Threaten A New Depression
- Japan To Continue Intervening in Yen Market
- Standards & Poors: Debt is In Explosive Path to 24...
- The Yen at 6AM
- China Wants to Avoid Japan's Fate And Will Not and...
- Embraer Closing Factory in China
- Brazil Warns That U.S., Europe and China Are Creat...
- Wild Currencies & Wars: Straddles Make It Fun (Upd...
- The Yen at 6AM
- Number of People on Food Stamps Skyrockets to 19.4M
- Geithner Issues Stern Warning to China On Currency...
- Yuan In-The-Money and 2011 Strangles
- Currency Straddles Update +36%
- Yen FXY Straddles
- Euro Move: Ireland Downgraded Again
- Goldman Sachs: U.S. Economy is Either 'Fairly Bad'...
-
▼
October
(125)
No comments:
Post a Comment