David Rosenberg: "How Can There Not Be A QE3?"

Tyler Durden's picture

From Rosie's "Breakfast with Dave"

Keep in mind that the Fed, unlike the European Central Bank, has a dual mandate — and the one pertaining to the goal of full employment is becoming even more elusive. The unemployment rate has already gone from 8.8% three months ago to 9.2% as of June and that is now well outside the year-end FOMC central-tendency projection band of 8.6% to 8.9%. The Fed believes it will be down to 7.8-8.2% by the end of 2012. Good luck.

The economy is going to need a lot more help to get to these numbers — not to mention the 3.2% consensus GDP growth forecast for the second half of the year. It looks like the majority of economists are in for another big surprise as they were heading into 2008 where visions of soft-landings filled the air.

Keep in mind that every recession was ushered in by a rise in the unemployment rate of 0.5 percentage point or more. We have now gone up 0.4 of a percentage point. Just another 10 basis points to go before the sufficient condition kicks in. And in this context we just love these two quotes on the front page of the Investors Business Daily:

  • "July and August ought to be a lot better than May or June."
  • "The chances of a recession are still pretty remote."   

You have to love the optimism but at the same time be a tad worried about the high level of denial out there. So many analysts cling to the ADP report and that it was the payroll data that were out of line (really, and what about the Household survey which showed a 445k plunge?). It is the ADP that is supposed to forecast the Bureau of Labor Statistics report, not the other way around.

It is also completely wrong to assume that the other data points for June were really that good, either. The ISM may have risen, due to inventories, but 80% of the regional indices were down and the non-manufacturing index was down as well. Maybe it was the manufacturing ISM that was out of line. Yes, yes, chain store sales were decent, but calendar effects and massive discounting helped out. And auto sales undercut May's lows and that is counted as consumer spending too, believe it or not. Consumer confidence and the NAHB index were very soft last month. Jobless claims at around 420k are indeed consistent with soft jobs data at a time when hiring levels are still so subdued. The euphoria over energy prices is bizarre considering that oil is still 30% higher now than it was a year ago.So sorry — the employment numbers on Friday were totally consistent with many of the other "extended" soft patch data that were released in June.

Everybody who is bullish on growth cites lower gas prices but this is the dog chasing its tail — volume consumption is down 5.5% YoY. Demand destruction is at play — have a look at the chart below and you will see that this is actually a recessionary statistic!

Source: Gluskin Sheff

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DiveGerl's picture

Right...just what we need right now, more QE.

oogs66's picture

We might not get qe3 because too many people realize qe2 did nothing for the real economy and the inflation hurt job growth more than any illusory wealth effect helped

mayhem_korner's picture

We might not get qe3 because too many people realize qe2 did nothing for the real economy

Take a quick poll of ten average joes on the street and ask them what they think of qe2 and you might rethink this.  They will answer in Babarino-esque "What?"

eureka's picture

Right O - and that's why QE3 is a political slam dunk - for without it, how is the US going to continue its favorite pursuits of national pump & pomp... DOW & EMPIRE...?

So, after some destruction in equities - right about now/Q3/11 - it's on with the ponzi i.e. the purely Symbolic Power - and then, for those in such frame of mind, it's time again to:

Bet On Stocks - Bet On Satan !

Robot Traders Mom's picture

@ mayhem-I'll bet "ten average joes on the street" don't even know what QE2 even was...

Ham Wallet's picture

QE2=Queen Elizabeth II to 99% of the population.

akak's picture

That is why we will never see QEIII anytime soon --- she hasn't been born yet!


(But when she is born, what an ugly monster she will be!)

knowless's picture

The vast majority are intimidated by the term "quantitative easing", let alone that there can be more than one of them. If it is discussed in the media it is only transitorily so, and never in enough depth to impart actual understanding, the only ones that know what it means are either directly involved in the financial community, or for whatever personal reasons have searched for why we are where we are and passed the gatekeepers of doubt/basic intelligence.


you're 100% right.

centerline's picture

J6P will cry for money to fall from the heaven's.  Doesnt know shit about QE this, TARP that, and so forth.  The Fed already laid the groundwork here by saying no more QE - UNLESS its autonomy was compromised or was forced to do so.  So... guess where the blame goes now?  Smooth.  J6P won't know what hit him until after it is too late.


Marty Rothbard's picture

They would probably think you were talking about the ship.  The Queen Elizabeth II.

Max Hunter's picture

Are you serious? dude... since when has logic/fundamentals hadanything to do with monetary (economic) policy.  They are trying to drive us into the ground son, or haven't you been paying attention.

john39's picture

yup.  all about power. collapse through rigging of monetary policy is the means.  fixing things was never in the cards...   instead, create mountains of debt, destroy the middle class, sow fear and choas while the global elite openly take full control and eliminate what you thought were your rights.  when it looks like the government is run by idiots, its only because you are looking at it wrong.  they are just playing their part.                    

MFL8240's picture

With so many countries in trouble, Japan, China, and all of Europe, who will buy all the upcoming US debt if not for QE3?

Peter_Griffin's picture


With so many countries in trouble, Japan, China, and all of Europe, who will buy all the upcoming US debt if not for QE3?


That's my question too.  Is it possible QE has let the fed buy up enough treasuries from banks, allowing for banks to step back up on treasury auctions?  Then once banks want more play money, BAM, qe3 frees up their dollars again?

That's my un-educated guess, but I would like to know the educated answer.

Shell Game's picture

It's not about what we need, it's about how TPTB trying for the status quo.

SMG's picture

The Bank of the Oligarchy (aka. Federal Reserve) has only one mandate.   Protect the Oligarchy's banks.  If you realize that and look back you can see the Bank of the Oligarchy has been really successful.

The banks are flush right now from QE2, and in my opinion, will be able to buy all sorts of things at a greatly discounted price, from this upcoming deflationary period.  Then QE3, and goodbye dollar.

youngman's picture

Tomorrow will be telling with the first of the bond auctions......WITHOUT the Fed...supposedly...at least that is what they said...quite exciting actually...I think I have a tingle up my leg....

HpDeskjet's picture

10y Treasury rates have dropped 25bp since the end of QE2... Stopping QE is not bad for bonds, its bad for equities

Transitory Disinflation's picture
"How Can There Not Be A QE3?"

When it is QE2.5

Janice's picture

"If you don't eat your peas, you can't have any pudding, how can you have any pudding if you don't eat your peas!"  "You! Yes, you! behind the bikesheds, stand still laddie!"

Shell Game's picture

All in all, we're all just peas in a pod?

Ignorance is bliss's picture

Even if the Fed. provides liquidity in the form of QE3 the Gov't needs to raise the debt ceiling in-order to borrow the money. We'll probably see an agreement sometime in the next 2 weeks at which time the Fed can start administering America's stimulus in the form of debt. Let's hope the system survives that long. looks like the patient is going into stimulus withdrawals.


eureka's picture

Is the Chair-Satan counting on Chinese Helicopters?

Waterfallsparkles's picture

Last POMO today and now they are worried after gunning the Market for the 2 weeks instead of Selling.

rdenner's picture

How can there be QE3 when we can not even get a debt ceiling increase passed with less than 2 weeks to go...


Things will continue... UNTIL THEY CAN'T!!!


Can't is getting a lot closer folks..



Leo Kolivakis's picture

Fiscal tightening in US increases the risk of deflation and pretty much ensures QE3. Bring on QE3 and let's have some fun trading scrap stocks:


Vic Vinegar's picture

Good point dude.  We are all going to need more Bennie Bux to maintain our current standard of living in the face of all this upcoming pea eating. 

Bring on QE3!

eureka's picture

Sweet! I am thirsty. Give me Vinegar.  :-)

gwar5's picture

Pea. As, in Obama's command that everyone should suck it up in this economy and "eat their peas".

fuu's picture

Back to posting in the comment threads? Better get your asbestos undies on Leo

akak's picture

"Undies"?  You have to be kidding!

Little leo the masochist is spanking his balls after posting here even as we speak.

It's about as much action below the belt as he is ever going to see:

"Hey baby, what do you say we go back to my place, and I show you my big fat Greek pension fund portfolio?"

Robot Traders Mom's picture

Leo, you are the Robot Trader of penny stocks. Congrats.

rdenner's picture

Also as pointed out above.. The fed is already involved in Stealth QE by reinvesting..... It isn't enough to boost the markets. But it is enough to keep a panic from setting in tomorrow on the bond auction...


Ole Bennie will be there with bells on, buying up the long end of the auction.



gorillaonyourback's picture


mayhem_korner's picture


It will be like the chronic gambler getting his bonus check delivered to his Vegas hotel.

plocequ1's picture

There will be a QE3. Now go home and get your shinebox

sabra1's picture

let's hope the fed  abolishes moodys, fitch & s&p before the debt ceiling increase. we wouldn't want a downgrade now, would we? 

knukles's picture

For all intents and purposes, the EU did that today.  Making them irrelevant with regard to ECB and other EU official financial activities.

Watch.  Without those independent, conflicted, corrupted ratings agencies, the EU'll have to fill the viod that've created, setting up an official governmental agency which will be totally independent, uncorrupted, objective and non-politically oriented.

Fuckin' AAA, man.

centerline's picture

The Ministry of Ratings.


Sends shivers down my spine.    

dumpster's picture

unemployment 9.2 while aall th4e headlines are now 16.3..


rosenberg is a tweb

Waterfallsparkles's picture

Tarp, Traders on Pot.  QE1 Traders on Crystal Meth.  QE2 Traders on Direct Inter venous injections of Heroin.

Time for Rehab and no one wants to give up their FREE Drugs and their HIGH.

knowless's picture

I'll quit drinking the second how hard I work translates to how much I make.