Tuesday, October 19, 2010

Stock Market Down, Time for a Fed Speak or Two

to promise us that help from the Federal Reserve is on our way. Probably on November 3, to be exact.

First, Dennis Lockhart of Atlanta Fed, from Reuters:

WASHINGTON (Reuters) - Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday that further easing by the Fed has to be large enough to help boost demand, and purchases of $100 billion of securities a month would be a possibility.

"If we're going to pursue another round of quantitative easing, it has to be a large enough number to make a difference," Lockhart said in an interview on CNBC.

"As a monthly number ($100 billion) is fairly consistent with what we did before, and so I think it would certainly be in the range of numbers one might consider ... but if you were talking about $100 billion as simply the overall program, I think that's too small," he said.

..."I think the risks associated with it are acceptable," he said. "Quantitative easing will help improve a recovery that is going very slowly and improve the trajectory of the economy overall."

And here's Charles Evans of Chicago Fed, via Zero Hedge (they have the entire speech of Evans):
As if we needed any further confirmation that the Fed is now willing to risk an all out bout of hyperinflation, here it comes courtesy of Chicago Fed's Charles Evans, whose comments that inflation is "acceptable", and welcome, and is the only way to battle the "liquidity trap" the US finds itself in, mirror those of NY Fed's Dudley who earlier confirmed Zero Hedge expectations that $100 billion is too low a QE2 number. Which means that very soon the Fed will buy up every single Treasury in existence. It will also kill the dollar absent Europe continuing on its path from earlier today, and saying the stress test was, in fact, a lie.

Here are the highlights from the full speech presented below.
  • Fed's Evans says temporarily boosting inflation may be hard pill to swallow, but potentially beneficial
  • Fed's Evans says boosting inflation temporarily is an entirely appropriate strategy to escape liquidity trap
  • Fed's Evans says it's likely the US in a liquidity trap, first time since Great Depression
  • Fed's Evans says price-level targeting would call for series of large scale asset purchases by Fed
  • Fed's Evans says sees US unemployment rate above 8% through 2012
  • Fed's Evans says it would be desirable to increase monetary policy accommodation
  • Fed's Evans sees US GDP growing 2%-2.5% in the second half of 2010, 3%-3.5% in 2011
  • Fed's Evans says if currency forecasts hold, sees 1% inflation in 2012, and below 1.5% in 2013

Good luck with that "temporarily" thing. Also, this is where PIMCO got its 2.5% GDP leak it appears.

So rejoice, small people in America, hyperinflation is good for you. Why? Because the Federal Reserve says so. Creating demand is more important than saving and capital formation. Why? Because the Federal Reserve says so.

Who is the Federal Reserve? They are the ones who created the bubbles in the past, most recently the real estate bubble, by "accommodating" monetary policies to help us out of recessions. And they will be the ones who will control every aspect of our financial lives, thanks to the Dodd-Frank financial "reform" act.

Aren't we lucky?


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