Goldman says QE3 likely after dovish Fed statement

[jk]

Goldman says QE3 likely after dovish Fed statement

SINGAPORE (Reuters) - Goldman Sachs said on Wednesday a third round of quantitative easing from the Federal Reserve is likely after the U.S. Federal Reserve promised to keep rates at extraordinarily low levels for at least two more years.

"We now see a greater-than-even chance that the FOMC will resume quantitative easing later this year or in early 2012. We have changed our call because today's statement suggests that the committee's reaction function to incoming economic news is more dovish than we had previously thought," Jan Hatzius, chief economist at the firm, said in a note.

The explicit commitment to keep policy rates low through mid-2013 and a bias to easing policy further were more aggressive than expected and resulted in Goldman penciling in QE3 after the previous $600 billion bond-purchase program ended in June.

Hatzius said he thought the fact that Fed Chairman Ben Bernanke went ahead with a promise to keep rates low within a specific time frame despite three dissents in the policy-setting committee was a sign the rest of the central bank believe renewed easing is important.

http://finance.yahoo.com/news/Goldma...83335.html?x=0

[Chomsky]

Re: Goldman says QE3 likely after dovish Fed statement

As if G-S isn't wagging the dog here.

[GRG55]

Re: Goldman says QE3 likely after dovish Fed statement

Maintain a steep yield curve = continued risk free profits for the banks who will continue to see bad debt losses for years to come;

ZIRP "forever" = negative real interest rates for as far as the eye can see;

Shrink the Fed balance sheet? = "Lord, make me chaste, but not yet!" [alternatively: "This porridge is too cold"];

Expand the Fed balance sheet? Well we can't recycle "Credit Easing" so we need to find another handle = "That which we call QE. By any other name would smell as sweet." [alternatively: "This porridge is too hot"];

Maintain the Fed balance sheet? = "Ahh, this porridge is just right" [Ben in the role of Goldilocks];

Dow down 360 points = "Someone's been eating my porridge," growled the Papa Bear;

Oil up $1.90 = "Someone's been sitting in my chair" growled the Papa Bear;

Gold knocking on $1800 = "Someone's been sleeping in my bed" growled Papa Bear.

You know how it ends...

[we_are_toast]

Re: Goldman says QE3 likely after dovish Fed statement

Isn't the debt ceiling debacle going to throw a monkey wrench into QE3 plans? If the FED could pump additional money to the Gov so they could have a stimulus program, it would make sense. But since the government is undergoing forced austerity, and messing with the yields won't have much of an effect if the private sector isn't borrowing, I'm not sure that this is going to be effective at all. And those dissenting votes sure makes this whole thing pretty messy.

I sure don't see an easy path for the FED to get money into the economy to create some demand.

[KGW]

Re: Goldman says QE3 likely after dovish Fed statement

You have a career in stand-up, GRG55! Funniest, most salient, comment I've heard in some time

[aaron]

Re: Goldman says QE3 likely after dovish Fed statement

I do not see why the fed cannot raise interest rates for savings accounts to something historically reasonable (7%, perhaps) while, at the same time keeping rates low for borrowing. It is all fiat and lies anyway.
That would help to fix things. I would certainly start spending money again if I could earn some rent. They got this cool FDIC insurance laws... Just decree that all FDIC insured accounts must pay 7% interest . Then, just allow banks the option to get extra free money from the FED to pay for it. It would be slowly inflationary, I suspect. But, it would certainly be money going into the real economy in a relatively fair way.

[GRG55]

Re: Goldman says QE3 likely after dovish Fed statement

Isn't the debt ceiling debacle going to throw a monkey wrench into QE3 plans? If the FED could pump additional money to the Gov so they could have a stimulus program, it would make sense. But since the government is undergoing forced austerity, and messing with the yields won't have much of an effect if the private sector isn't borrowing, I'm not sure that this is going to be effective at all. And those dissenting votes sure makes this whole thing pretty messy.

I sure don't see an easy path for the FED to get money into the economy to create some demand.

Please explain to this mystified onlooker how a government can practice "austerity" [forced or otherwise] at the same time it is increasing the national debt [and not marginally either!].

You don't really believe that Washington is going to be able to reduce the deficit do you? With the US economy already in negative real growth, and a material probability of negative nominal growth shortly, all those optimistic forecasts of projected tax revenues are going to prove exactly that - optimistic. I will venture that the odds are for the fiscal deficit to expand, not contract in the next couple of years...

[we_are_toast]

Re: Goldman says QE3 likely after dovish Fed statement

Please explain to this mystified onlooker how a government can practice "austerity" [forced or otherwise] at the same time it is increasing the national debt [and not marginally either!].

You don't really believe that Washington is going to be able to reduce the deficit do you? With the US economy already in negative real growth, and a material probability of negative nominal growth shortly, all those optimistic forecasts of projected tax revenues are going to prove exactly that - optimistic. I will venture that the odds are for the fiscal deficit to expand, not contract in the next couple of years...

I don't think there's much mystery.

Austerity, is being defined as a cutback in the projected spending of the Government. If you accept that our current great recession economic problems are due to failure to close the output gap, ie lack of demand, then austerity will only cause the output gap to widen. The consequences of which, you have described quite well and which I fully agree. The question is, will revenue's drop faster than the austerity budget cuts? I think it'll be close to a tie.

If QE3 is intended to pump money into the economy in order to stimulate demand, I think Bernanke has a real problem. World conditions have created a situation so there is plenty of demand for U.S. treasuries, so QE3 won't have much impact on interest rates. And because of the cutback in gov spending, the supply of treasuries won't be there to make it easy for the FED to inject money into the productive economy.

I'm afraid helicopter Ben may have to live up to his nick name. Keep your eyes on the sky!

[c1ue]

Re: Goldman says QE3 likely after dovish Fed statement

If QE3 is intended to pump money into the economy in order to stimulate demand, I think Bernanke has a real problem. World conditions have created a situation so there is plenty of demand for U.S. treasuries, so QE3 won't have much impact on interest rates.

Do you really think the Fed executes on QE3 in order to stimulate demand?

I know, that's what sound comes out when Bernanke's lips move.

But the money doesn't ever get to the economy - it stops in bankster's hands and pockets - and only leaves in the form of Bentley and private jet purchases.

And because of the cutback in gov spending, the supply of treasuries won't be there to make it easy for the FED to inject money into the productive economy.

I don't see why you believe this at all.

Between QE1 and QE2 - the Fed itself was the single largest purchaser of Treasuries in the past 3 years.

While the government's spending may be 'cut back' in the sense of not growing as ridiculously as it has from 2007-2009, on the other hand the government is still very heavily deficit spending.

Even beyond that, the Fed's actions are not limited by the government per se: should the Fed embark upon a $1 trillion QE3 - do you really think the program will fail due to some silly thing like Treasury supply/demand?

Only if/when QE(x) exceeds the actual federal budget will the game be up.

[lektrode]

Re: Goldman says QE3 likely after dovish Fed statement

Please explain to this mystified onlooker how a government can practice "austerity" [forced or otherwise] at the same time it is increasing the national debt [and not marginally either!].

marginally?

how about exponentially...
what - tween the actual hike in expenditures, for 'stimulous' (mostly to the banksters bottom line), the fiasco known as 'healthcare reform' and THEN the 'taxcut' on FICA/payroll tax (heh, 10bux/wk for most of the working class, at best - which then SCREWS THE WORKING CLASS DOWN THE ROAD)
never mind the interest on 3 trillion in deficit spending for TWO years??

this is why people with NO BUSINESS EXPERIENCE should not _ever_ be allowed to run for president!!!!!!
for the simple reason that they probably didnt grade well on math

I don't think there's much mystery.

Austerity, is being defined as a cutback in the projected spending of the Government..... !

tell me what/where were there any 'cutbacks' ?
not GD thing has been 'cut back' - not in 'real' terms, nor nominal

this, 'cutbacks' is just another 'managed meme'

As if G-S isn't wagging the dog here.

+1

[lektrode]

Re: Goldman says QE3 likely after dovish Fed statement

Do you really think the Fed executes on QE3 in order to stimulate demand?

I know, that's what sound comes out when Bernanke's lips move.

But the money doesn't ever get to the economy - it stops in bankster's hands and pockets - and only leaves in the form of Bentley and private jet purchases.
....

ah but theres the rub, mr c1ue - when its the productive class' bentleys and private jets, ITS A PROBLEM?
but when it leaves in the dem/bankster/political aristocracy's jets (like queen nancy, al gore and the rest of the limosine liberal set in manhattan) bentleys/private jets are OK, or at least they must be ok with the liberal-media/chattering class, since they never seem to focus on that stuff, UNLESS ITS THE 'fat cats' IN THE PRIVATE SECTOR

[lektrode]

Re: Goldman says QE3 likely after dovish Fed statement

I do not see why the fed cannot raise interest rates for savings accounts to something historically reasonable (7%, perhaps) while, at the same time keeping rates low for borrowing. It is all fiat and lies anyway.
That would help to fix things. I would certainly start spending money again if I could earn some rent. They got this cool FDIC insurance laws... Just decree that all FDIC insured accounts must pay 7% interest . Then, just allow banks the option to get extra free money from the FED to pay for it. It would be slowly inflationary, I suspect. But, it would certainly be money going into the real economy in a relatively fair way.

'fair' ?
who said anything about fair?
we need to keep the banks in 'liquidity la-la land' so that they will keep lending...
what? they arent lending anyway?
well... that just because there's nobody left to lend to - that hasnt already gorged themselves at the ZIRPland buffet
small biz?
who needs them, when the TBTF has the fortune500 filling their vaults with 1-3% funds the banks get from uncle ben fer free.
buddy, you better come in outa that seattle heat, its gettin to ya...