Just what is Bernanke up to? L. Randall Wray.
With QE2, the Fed proposes to buy longer-term treasuries. Since these are not toxic, it will not help the banks. It is like transferring funds from CDs they hold at the Fed to their checking accounts, thereby reducing their interest earnings. I suppose the idea is that the Fed is going to reduce bank income, impoverishing banks to the point that they will finally throw caution to the wind and begin to make loans to struggling firms and households. It is simultaneously a strange view of banking and also a scary remedy to a financial crisis that was created by excessive bank lending to those who could not afford the loans. It’s sort of like sending a covey of nymphomaniacs to the hospital bed of a nonagenarian suffering from myocardial infarction initiated by an age-inappropriate tryst.
Fasten your seatbelt. John Taylor.
On the day after the Fed’s move, [Bernanke] wrote in a Washington Post editorial piece that QE2 would push up the equity market, bonds, and other risky securities thereby stimulating consumption and economic activity. Even Greenspan did not publicly proclaim his “put,” but now Bernanke has made it the centerpiece of US strategy. Equities are already overpriced, with profit margins at all-time highs and PE ratios far above average. Speculation is now more American than apple pie – but this is a very risky time to practice it.
It’s Going to Be Another Long, Hard Winter in Housing. Zillow Real Estate Research.
Annual State of the Residential Mortgage Market in Canada. CAAMP.
other fare:
Robert Reich makes some excellent points about why Obama should take a stand, but Reich is naive if he thinks Obama will do so --- he's clearly gonna cave in.
Oh, look at that, it might as well be official --- the Huffington Post says White House gives in on Bush tax cuts.
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