The End of the Beginning for QE in the US...?

sabretoothtigger

USA is our largest trading partner, we are tied to USA till that can change. Even then we do a large amount of finance trade and USA is number one economically

They can never stop QE.

There is an illusion of control. Its like the magicians apprentice, QE is the master

Thrugelmir

Graham_Devon wrote: »

To reduce the value of the pound.

That's never been the direct purpose of QE. Perhaps a consequence. Like the Fed, the BOE is focused on domestic issues.

wotsthat

Talking head guest on Bloomberg this morning reckons tapering won't even start for another two years.

I'm not even going to pretend to know what effect this may have on UK policy. Think I'll keep avoiding cash like the plague though.

chucknorris

wotsthat wrote: »

Talking head guest on Bloomberg this morning reckons tapering won't even start for another two years.

I'm not even going to pretend to know what effect this may have on UK policy. Think I'll keep avoiding cash like the plague though.

We are currently looking into really stepping up our move away from cash at the moment, we have arranged to view 4 houses this Saturday morning (only intend to buy one for now, it is a new area for us).

sabretoothtigger

Talking head guest on Bloomberg this morning reckons tapering won't even start for another two years

Its not relevant anyway, its like saying they havent decided to make it rain yet or not. Its not the weather forecast that determines anything and they cant even reliably predict nor can some gov bods better that with money

wotsthat

sabretoothtigger wrote: »

Its not relevant anyway, its like saying they havent decided to make it rain yet or not. Its not the weather forecast that determines anything and they cant even reliably predict nor can some gov bods better that with money

It's almost certainly not relevant - he only appeared on Bloomberg because he had something to say of interest to the viewers.

There was a train of thought though that 'the markets' were expecting QE to be reined in last night. Maybe this isn't so much about economics but the fed delivering a quick lesson about who makes the weather and who forecasts it.

Thrugelmir

wotsthat wrote: »

There was a train of thought though that 'the markets' were expecting QE to be reined in last night. Maybe this isn't so much about economics but the fed delivering a quick lesson about who makes the weather and who forecasts it.

More importantly the Fed obviously believes that the US economy is far from fixed. Looking at their long range forecasts.

Net job creation is still too low in relation to the number of new people entering the job market every year.

wotsthat

Thrugelmir wrote: »

More importantly the Fed obviously believes that the US economy is far from fixed. Looking at their long range forecasts.

The markets disagree as to how far the US economy has to go before it can be considered fixed. The Fed want people to listen to them and not the markets so what they do is every now and again prod the markets so that people off-message lose money - next time these people will be more likely to pay attention.

The same will happen here with forward guidance. The BoE will set up little traps to catch out those who don't buy into the message that rates will stay low for ages so you may as well take more risk.

I like a conspiracy theory.

grizzly1911

Stewart Cowley, who runs the five crown-rated Old Mutual Managed fund, has been one of the most outspoken critics.

He says that although equities may continue to rally in the short-term, the Fed’s decision to postpone tapering is the worst possible move, not only for investors, but the global economy as a whole.

"This is an extremely disappointing reaction by the Fed," Cowley said.....

"But the market reaction just shows how hooked on the QE process the US economy still is five years after the collapse of Lehman Brothers. This is nothing to cheer about. It will make the eventual day of reckoning even worse for the bond and equity markets."

"I suspect the euphoria won't last long: we are now engaged in the biggest game of 'Chicken' the world has ever seen."

"Investing in US government bonds has become the equivalent of running into the middle of the motorway to pick up pennies," he added.



David Buckle, head of quantitative research at Fidelity, was equally damning.

He says that although Bernanke’s decision may have some merits, it shows a clear lack of forward guidance. He questions whether the Fed has any clear game plan, putting investors in a very bad position.

"The Fed gave forward guidance relating to a specific variable. Now it tells us that variable is too poor to be usable," Buckle said.

"In the same press conference, Bernanke told us that 'an unemployment rate of 7.3 per cent is well above acceptable levels', but that the unemployment rate isn’t a good measure. The 7 per cent tapering target and 6.5 per cent rate-rising threshold have been watered down."

"We aren’t getting forward guidance at all."

"By his own admission, communication was to be Bernanke’s key policy tool. That tool has now been severely blunted."

http://www.trustnet.com/News/457565/fund-managers-slam-feds-qe-decision/


It will be interesting to see how worthwhile Carney's forwrd guidance is in due course. Will no doubt prove to move with the wind too.

Thrugelmir

grizzly1911 wrote: »

Will no doubt prove to move with the wind too.

No other way. As another storm could blow up at any time. Eurozone banks for example.