Amid the political and social uprisings in the Middle East, and union protests in the U.S., a recent speech by a pivotal U.S. policy maker received little attention, but it's one that investors should review.
In a speech before the recent G-20 meeting, U.S. Federal Reserve Chairman Ben Bernanke urged emerging market nations to address the flood of money streaming into their markets.
Continue reading Bernanke: Emerging Markets Need to Address Capital Flows
The past week's data-point-of-consequence for investors was delivered by none other than the head of the world's most powerful central bank. U.S. Federal Reserve Chairman Ben Bernanke underscored the nation's need to raise the debt ceiling.
Speaking at a National Press Club luncheon in Washington Thursday, Bernanke said delays in raising the debt ceiling limit, currently $14.3 trillion, could have "catastrophic" consequences, Reuters reported.
Continue reading Bernanke: Failure to Raise Debt Ceiling Could Be 'Catastrophic'
One economic data point that sort of slipped under the radar recently concerned the U.S. Federal Reserve's $78.4 billion payment to the U.S. Treasury in 2010, up about 65% from $47.4 billion in 2009.
And the reason for the revenue surge? Experienced investors or others who have reviewed the Fed's report will realize that much of it stems from income from the Fed's purchase of mortgage securities and Treasury securities in connection with the quantitative easing, part 2 program, or QE2.
Under QE2, the Fed will purchase up to $600 billion in assets from November 2010 to June 2011 -- this coming after the Fed purchased $1.7 trillion in assets through March 2010.
Continue reading Tell-Tale Stat: Fed Paid $78.4 Billion to U.S. Treasury in 2010
The Federal Reserve has embarked on a controversial new program of buying $600 billion of U.S. Treasuries to keep interest rates low and spur the economy.
There is some disagreement among some members of the Fed concerning the risks of this new program. Some fear that the economy is growing too rapidly, fueling unwanted levels of inflation, as reported by CNNMoney.
Continue reading Fed Members Differ on Economic Outlook
The FOMC Minutes gave a Bernanke justification, or attempted re-justification, for QE2 today. Shares tried to have a positive day yet again for the second trading day of the year but the tone was very mixed despite a higher DJIA close at a two-year high. Gold saw major selling, as did most other commodities. This was a positive day for the DJIA, but the S&P and NASDAQ looked weak at the close.
Here were the closing bell levels:
Dow Jones 11,691.18 +20.43 (0.18%)
S&P 500 1,270.20 -1.69 (-0.13%)
Nasdaq 2,681.25 -10.27 (-0.38%)
Continue reading Closing Bell: Mixed Second Day of 2011 (ATHR, QCOM, GM, GLD, WFMI, XOMA)
The verdict on the U.S. Federal Reserve's quantitative easing program, including part 2, or QE2, will not be rendered for years. It may be longer, given the many areas of financial and economic policy the program has touched.
Anyone who says they definitively and incontrovertibly know QE2's long-term impact is not being genuine: many more data points have to occur to judge, for example, how QE2 affected banker lending psychology, let alone its impact on the U.S. economy.
That said, we can glean clues and insights by looking at current conditions, and one short-term data point reveals that since Fed Chairman Ben Bernanke disclosed the implementation of QE2 on August 27, the S&P 500 is up 17%, Bloomberg News reported Friday.
Continue reading A Bernanke Rally? S&P 500 Up 17% Since QE2 Announced
The Federal Reserve Open Market Committee stated, again, that interest rates will remain low for an extended period of time and that quantitative easing will continue with the "purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month." Thomas Hoenig again voted against the FOMC policy.
The FOMC left its options open for the future and gave no specific guidance as to what actions it will take when QE2 ends next year.
Continue reading The Fed Statement: No News, Just Confirmation of Policy
To say that the financial crisis era has been riddled with half-truths, distortions, and outright falsehoods regarding the unprecedented public policies designed to maintain stable, liquid credit markets and help stimulate the U.S. economy, would be an understatement. Moreover, investors need to disabuse themselves of them if they hope to make informed, balanced, and prudent investment decisions.
One such misnomer concerns the categorization of quantitative easing.
As U.S. Federal Reserve Chairman Ben Bernanke took pains to clarify Sunday, during his CBS '60 Minutes' interview,
the Fed is most certainly not 'printing money.'
A monetary policy of printing money would involve adding money to the financial system that chases the same amount of goods. That can and typically does lead to higher inflation.
Continue reading Fed's QE2 is a Bridge to Normal Credit Markets
Reuters quoted Federal Reserve Chairman Ben Bernanke as saying: "We're not in the business of trying to create inflation. Our purpose is to provide additional stimulus to help the economy recover and to avoid potentially additional disinflation, which I think we'll all agree could also be worrisome."
Bernanke claims that inflation is below the Fed's 2% target. That's hogwash! Sure if you use the "core" CPI, which leaves out food and energy, that may be the case. Not to worry.
Continue reading Bernanke Says He Does Not Want to Create Inflation
The Federal Reserve Open Market Committee (FOMC) issued its statement indicating again that interest rates will remain low for an extended period of time and that proceeds of Treasury securities will continue to be re-invested into additional Treasury securities.
There will also be additional quantitative easing. This will take the form of the purchase of an additional "$600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month," according to the Fed's statement. This was well within the $500 billion to $1 trillion range expected by many economists and strategists. Thus, the current program appears to be largely discounted by the market.
Continue reading The Fed Decision: This is Not the End of Quantitative Easing!
With only a few days left before the Federal Reserve meeting on November 2-3, speculation is rampant concerning whether the Fed will ease, and if so how much.
Here are a few scenarios, as reported in Reuters:
- The general consensus is that the Fed will do some kind of quantitative easing, dubbed QE2.
- Some think it will be $500 billion for five months with more if needed.
- Others think it could be $750 to $1 trillion.
- Will it be open ended with $100 billion per month?
- Perhaps it will be $500 to $750 billion with more if needed.
Continue reading Will the Fed Ease? If So, How Much?
The U.S. Federal Reserve is in a quandary about how to explain its anticipated quantitative easing stimulus, dubbed QE2. Officials worry that an added stimulus will create unwanted inflation.
Fed officials Charles Evans and William Dudley have spoken in favor of the new stimulus. Dudley told the Financial Times that asset purchases and communication are "two potentially complimentary avenues."
Continue reading Fed in a Quandary About How to Explain QE2
There is talk among some members of the Federal Reserve about whether we should have more inflation to spur the economy. This is a hot button. If you push it, you can start a fire that cannot be put out. That was the case in the 1970s when inflation ran rampant and interest rates shot up to 18%. Fed chairman Paul Volcker managed to put that fire out, but in the meantime the economy was thrown into a severe recession.
Fast forward to the present. The Fed has an unofficial inflation target of 1.5% to 2%. Fed members Dudley and Evans are of the mind to let inflation float above these levels for a time, and then bring it back down. They expressed their views in the Wall Street Journal
Continue reading Fed Officials Discuss Whether We Should Have More Inflation
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