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Monday, September 27, 2010

Unchartered Waters

Does anyone know an expression for when we are beyond uncharted waters?

QE2 is on the way, according to 70% of a recent CNBC survey of 67 economists, analysts, and technicians. It will likely add a chunk (is $1 trillion meaningful anymore?) to the Fed's balance sheet and supply an ever-growing pile of excess reserves - the fuel for printing money. The Fed's policy is to inflate our way out of our economic malaise.

The trigger point, according to Mark Zandi of Moody', will be a rise in the unemployment rate to 10%. He believes QE2 will begin in December.

I think we should skip all this interim stuff and just have the Fed use their unconfined fiat money checkbook and add 20% to the bid for any house sale. The faster the Fed can get house prices ramping up again at a double digit rate and homeowners borrowing against their equity, the faster we can get back to the good ol' days of 2006. Who knows - we might even create a couple of jobs in the process, at least temporarily.


  1. I guess it helps to explains the rise of PMs (and equities for that matter)

  2. The rise might not hit 10%; part-time work will be coming soon in preparation for the Christmas shopping season. That is of course, dependent upon people having money to shop.

  3. I'd rather see policy makers let the economy come back on its own rather than continuing to manipulate interest rates where everyone knows its temporary and therefore hesitant about making long term decisions.
    Focus on making it easier for innovators to do their thing and quit controlling the price of money.

  4. Beyond here, there be dragons....... is one possibility. That is usually where the map ends.

    Economic manipulation got us into this mess in large part and economic manipulation is not going to get us out. The economy needs to recover organically.

  5. Fire breathing dragons no less-at the edge of the map.
    I agree on doing away with manipulation. There is a theory that Greenspan smoothed the business cycle to such an extent that people forgot that markets are risky and risk averse behavior was cast aside. This is exactly the kind of thing that we don't understand. Doing "good" in the short run is harmful in the long run.