One TRILLION Dollars – muhahahah!
That's the magic number being floated as reported by CNBC who say:
The Federal Reserve is likely to step in with $1 trillion worth of easing that could be announced as soon as this month, according to a growing consensus of economists who see the recent uptick in economic growth as unsustainable.
Now PLEASE – pay no attention at all to "who see the recent uptick in economic growth as unsustainable" and focus on ONE TRILLION DOLLARS ($1,000,000,000,000). That's $3Bn EVERY SINGLE DAY – that's $2M a minute that will (if correct) be poured into the economy (or, more accurately, into the pockets of Banksters) that can go directly towards what Hayek (not Salma) calls "malinvestments" – sowing the seeds for many, many years of hyperinflaton — but only after the Banks are done siezing all the assets they possibly can.
Our own friend, Andrew Wilkinson, who is now the Chief Economic Strategist at Miller Tabak, released a paper Thursday that makes the case for more easing, which he said could push stock prices higher to where the S&P rises another 11% to 1450.
"Investors are so focused on the Fed's new rate forecasts that some don't realize the announcement of more quantitative easing might come along with it – the two had to go hand in hand," Wilkinson says. "They need to make projections in light of having announced more QE, otherwise they'd have to change the forecasts later on." This will iron out the yield curve, anchoring down short-dated yields while also dragging 10-year yields to 1.5%, he says.
Even if Wilkinson is wrong about QE — as most analyst don't expect it to be announced until later this year — he says the market will still likely be surprised at just how far out the Fed intends to stay on hold. "This simple fact represents uncharted territory for the Federal Reserve," Wilkinson wrote. "Despite a recovery in growth and employment, the crippling damage inflicted by the subprime warhorse continues to play a worrisome role behind the scenes."
We discussed all this in Member Chat so I won't re-hash it here, especially as I'm down in Florida today and don't have time for a full post. Suffice to say that it's not a good thing to pre-announce big numbers like this as it sets us up to be "disappointed" by an $800Bn QE round next week. I'm still trying to get more bullish, really I am, but if this is all the reaction we get from these kinds of rumors – we still have BIG TROUBLE.
Now we may have to wait for the Fed next week to see what's what. It's not fun, but it's prudent.
Have a good weekend,
– Phil
