On Friday afternoon, CNBC hinted that QE3 may be imminent:
Federal Reserve officials are seriously considering giving the US economy—and especially the housing market—an added jolt with more quantitative easing.
It is also significant that financial markets expects [sic] the Fed to act.
Already some Wall Street banks are building QE3 into their forecasts. Morgan Stanley fixed income economist David Greenlaw said he expects more easing to be announced this spring.
With Tom Hoenig now off the FOMC and in retirement, the inflation hawks are getting pretty thin. Also, due to recently-adopted regs, FOMC members are now being told to “refrain from describing their personal views” on inflation and on QE, so we may see even less of a debate on this in the future.
The Dallas Fed has noted that home price appreciation didn’t reflect real economic conditions as early as the 1990s.
The imbalance between economic growth and home prices first emerged in the 1990s, the report contends.
“The house price growth rate kept climbing until around 2005, even though real GDP growth didn’t similarly increase and even weakened around the 2001 recession,” the researchers added
Many analysts noticed this but were laughed at for being too bearish. Certainly the new home inventory grew steadily to historic highs from 2003 to 2005 as new construction charged ahead, but demand moderated. That was also a sign of trouble, although few seemed to care.
A Fannie/Freddie overhaul continues to look unlikely, as noted by The Hill, legislation to reform or privatize the GSEs are going nowhere.
Given the current economic orthodoxy in Washington, it’s hard to take comments like this seriously:
“As we continue to move immediate reforms, our ultimate goal remains, to end the bailout of Fannie, Freddie and build a stronger housing finance system that no longer relies on government guarantees,” panel Chairman Spencer Bachus (R-Ala.) said last summer.
As a sign of some returning prudence, however, home-loan originations, as measured by LPS, were down 24 percent in October from a year earlier. A decline in home-loan activity might help to fuel badly-needed increases in savings.
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Love the current finance news, give a shout out to #stopsopa
IGM forum addresses the gold standard: http://bit.ly/w4VN8s
I especially like the weird reasoning that gold is unstable because the price of gold changes compared to the price of the dollar.
Also, this: “Since gold has supply and demand dynamics of its own, for reasons unrelated to its use as a store of value, Americans would exposed to risk.”
How about this gem: “This proposal [a GS] makes no sense in the modern world. Just look at the Eurozone to see the consequences.”
I was trying to figure out what he could have meant. I assume he thinks their problems are due to not being able to expand money supply in each country. They have no clue about the source of wealth and if they do well then they are just evil.
Darnit. I wish I wouldn’t have clicked that link. Don’t know what is worse their comments or the smug face I imagine they had when they made the comment.
Maybe we could send toilet paper to the Federal Reserve in protest, to illustrate how much the U.S. dollar will be worth after QE3?
@ Editor: typo “overall”
Thank you. Fixed.
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