We’ve seen just about everyone else’s opinion on QE3 in recent days (see here and here)
so I’m going to put my head on the chopping block here again (I’ve had a
decent string of successful calls on these Fed meetings, but my luck
has to run out eventually, right?) and try to predict the madness of
central bankers. Here’s my thinking on QE3 as if I were sitting in on
the FOMC meeting advising Dr. Bernanke on where we should go next.
Here’s where we are. The economy is weak. Everyone knows it. Unemployment is far too high. Inflation is not a big concern, but slightly above our target. The stimulus doesn’t seem to have helped a huge amount, but no one knows for sure. The economy appears to be showing some signs of life in the real estate sector, but we can’t hang our hat on another housing recovery to drive us out of this rut. The government needs to do more and we aren’t completely out of ammo (at least we don’t think so). That’s the 30,000 foot view. Let’s take a closer look:
Here’s where we are. The economy is weak. Everyone knows it. Unemployment is far too high. Inflation is not a big concern, but slightly above our target. The stimulus doesn’t seem to have helped a huge amount, but no one knows for sure. The economy appears to be showing some signs of life in the real estate sector, but we can’t hang our hat on another housing recovery to drive us out of this rut. The government needs to do more and we aren’t completely out of ammo (at least we don’t think so). That’s the 30,000 foot view. Let’s take a closer look:
- The Fed is an independent entity and seeks to avoid politicizing its role in the economy. There is nothing more political in America than a Presidential race. So the Fed has to tread very carefully here. Does recent economic data really warrant appearing political and implementing what will be viewed as a hugely important stimulative package just weeks before a Presidential election? I don’t think so. We can afford to wait and the prudent thing to do is to wait.
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