This page has been archived and commenting is disabled.
With QE2 "Sealed", Next Rate Hike Won't Come Until 2015 Says Goldman
Jan Hatzius pretty much slams the door on any possibility for a liquidity moderation (let alone exit): "We found that under our own economic forecasts it might take until 2015 or longer before a rate hike became appropriate." In other words, the US economy will very likely just go down in flames, as the Fed makes sure that each and every American is infinitely "rich" courtesy of zero cost debt denominated in worthless dollars. The only salvation from this outcome is for the rest of the world to stage a Fed intervention before it all burns down. Of course by that point, the next reserve currency will be in tow, and few if any will care what happens to that particular former superpower. And just the message is heard loud and clear, Hatzius says that even with a QE of over $100 billion (but under $150 billion) monthly will hardly proceed to rescue the economy: "Even after the next 6-9 months, we still see still plenty of headwinds that will keep the growth pace slow by historical US recovery standards. And in an absolute sense the economy is unlikely to look good for a long time to come, especially from the perspective of unemployed workers who will continue to face difficulty finding jobs." This, however, will not prevent speculators, now awash with more free money than they could ever imagine, from opening commodities limit up each and every morning until the end consumer finally realizes that $5 gas/$10 milk does not quite jive with the core CPI lies.
Full Hatzius note:
1. Friday’s jobs numbers put the seal on a quantitative easing announcement at the November 2-3 FOMC meeting. Excluding Census layoffs, the economy lost 19k jobs in September, the weakest since December 2009. The private sector logged a 64k employment gain, but this was more than offset by an 83k drop in state and local jobs, concentrated among teachers. In addition, the preliminary benchmark revision (to be finalized early next year) suggests that the economy lost 366k more jobs between March 2009 and March 2010 than initially estimated. In contrast to the weak establishment survey, the household survey was mixed but on balance slightly better than expected.
2. What will the Fed do? The data over the next three weeks will matter for the details, but right now we expect an announcement of something like $500bn in purchases through the spring or summer of 2011, coupled with a strong signal that they are prepared do more if needed. Indeed, it is also possible that they will announce a monthly purchase rate of perhaps $100bn until their inflation forecast returns to levels closer to their mandate. Whichever way the announcement is structured, we expect the monthly purchase rate to be below the $150bn pace seen in the spring and summer of 2009.
3. The FOMC is also still thinking about other ways to ease financial conditions, in particular via changes in its communications. While the point of asset purchases is to bring down the term premium at the longer end of the yield curve, the point of changes in communication is to convince the market that the funds rate will stay low for even longer than is now discounted. So the two policies are very complementary.
4. To achieve a further drop in fed funds rate expectations, we have argued that the chairman might want to give a detailed speech about “optimal monetary policy” models showing that it might take several more years before a hike in the funds rate becomes appropriate. We found that under our own economic forecasts it might take until 2015 or longer before a rate hike became appropriate (although we emphasized that this was a scenario projection rather than a formal forecast). Another example is the article by Glenn Rudebusch of the San Francisco Fed available at http://www.frbsf.org/publications/economics/letter/2010/el2010-18.html, which currently would also seem to imply no hikes until late 2012 or early 2013 (the precise date depends on the FOMC’s new forecasts to be released in the November minutes). If the Chairman presented his own version of this type of analysis, this would not be a “commitment” because it would be based on uncertain forecasts. But a detailed explanation by Bernanke of just how long the funds rate might stay near zero could nevertheless help lower bond yields and ease financial conditions further, and thereby complement the QE2 announcement.
5. So will it work? QE2 and its impact on financial conditions is one key reason why we expect the economy over the next 6-9 months to be only “fairly bad” (1%-2% GDP growth, a gradual increase in the unemployment rate, and modest further disinflation) rather than “very bad” (a renewed recession with outright declines in GDP). Other reasons are that bank credit quality is improving gradually and activity in the cyclical sectors of the economy is already so depressed that renewed large-scale declines are unlikely. There are still some significant recession risks out there, most notably (a) a bigger-than-expected house price decline driven by the large-scale supply overhang and (b) a sharper-than-expected turn to fiscal restraint, i.e. a full expiration of the 2001-2003 as well as 2009 tax cuts. But barring these risks, the more likely outcome over the next 6-9 months is below-trend growth rather than recession.
6. Even after the next 6-9 months, we still see still plenty of headwinds that will keep the growth pace slow by historical US recovery standards. And in an absolute sense the economy is unlikely to look good for a long time to come, especially from the perspective of unemployed workers who will continue to face difficulty finding jobs. Also, because of the large output gap, inflation is likely to fall somewhat further and the funds rate is likely to stay near 0% for a very long time to come. But if we get through the next 6-9 months, the growth pace is likely to pick up in the remainder of 2011, from clearly below trend to about a trend pace. So the pattern should look more encouraging than in 2010.
»
- 7403 reads
- Printer-friendly version
- Send to friend
- advertisements -
If that come true it won't matter as true anarchy in the streets will be well underway. Wahington and the Fed will be gone by then and the family farm will make a come back.
@ Hondo, In my opinion, we will not experience 'anarchy in the streets'. Instead i think people will dramatically recalibrate their willingness to participate in the FED denominated social engineering experiment. Lot os folks are gonna go "off grid", in one way or another. It's not gonna be Mad Max, it's gonna be 1706 with the Internet.
That, assuming the DNS will be left on.
The sky is full of black swans, Goldman are opptomists.
I could be dead wrong, i dont think the FED does QE this November. Not with the SP at 1165, and commodities going thru the roof and the dollar tanking.
I think they will hold.
In the long run, does not matter, the average guy was not taking on debt at record low rates, what is another 50-100bs gona do. NOTHING.
They are trying so hard to revive an old system that no longer works. Our economy is built on credit expansion, that is over. Most people are broke or living pay check to pay check. Most baby boomers are done spending.
Anyone who is bullish has to ask themselves, why is the FED gonna do another QE?
When everyone is on one side of the trade (QE will save us), I will gladly take the other side
Me too, when everyone has Q/E2 signed, sealed and delivered I'm taking the other side of that crap. This level of certainty of future events is nonsense, far too simplistic, and doesnt take into account these guys are all basically a bunch of Batman villains.
Hold on a moment.
Isn't the November meeting to get "approval" and/or support for QE2 but not necessarily implement it? I mean they're not going to print $100b per month no matter what. Isn't the idea that once BB gets the authority, he will be able to act as he chooses at will? We should expect some kind of announcement that tells us that they approved it "for use when necesary" or other such smoke and fog.
Or did I get that all wrong?
is forclosure-gate (did somebody get a new catch-phrase yet?.I did not get the memo) add more gas to QE2 fire? -i.e., heli-ben to self: "self, shit is bad, but with these forclosures...more importantly the CDS deals are worthless defrauding products, the PDs/banks are really roasted."
will populace view this then as the pitchfork moment? or will they catch it in time? Since when does the FED care what the "populace" thinks? inquiring minds...
Yep now that everything is totaly bankrupt and the banks are back in deep trouble and the FED holds trillions worth of junk stock, I guess thhey'll pull $5 trillion out of a magic hat to pay everyone off and keep stocks rising.
If people cant see this fraud has no place to go but very bad real soon, well good luck to em they'll need it.
Actually, we may be passing the whole pitchfork phase in it's entirety and moving directly into ropes and lamp posts.
Now that no one buys our votes, the public has long since cast off its cares; the people that once bestowed commands, consulships, legions and all else, now meddles no more and longs eagerly for just two things----Bread and Games!
Juvenal, Satire 10.77–81
+1
since the bank gets to conjure into existence the amount of the loan & write it into the borrower's account I'm unclear as to why they don't unconjure the thin air owed & just carry on as normal.
iow, if the money didn't exist in the first place what does it matter if it doesn't get paid back.
idk, fairly irrelevant at this point..it helps to ponder some of this shit some of the time...definitely not all the time
I cannot understand how the Fed thinks QE will work, just as a stimulus was doomed to failure in the end. Everybody is lent or borrowed up to the hilt.
They are pumping fuel into a flooded carburetor. All that fuel has gotta drain first.
The Fed's plan is working as designed - loot the treasury, devalue and debase the currency over multiple generations then keep the spoils.
there be no shelter here
The article in the Telegraph that TD posted sugests that BB wants QE2 in order to force China to revalue the Yuan. FWIW
What are these people at Goldman smoking? Damn, I forgot to bring my boots along this morning.
A fairly decent assessment of the chicken coop by one certainly definitely sly fox. The characteristic feature of these financial prognostications from the dominant financial institutions such as Goldman and the international hegemons such as the IMF is, to a large degree what is left unsaid as much as anything that is actually enunciated. Now that the Pandora's Box of endemic MBS security fraud tied to the real monster of fraudulent OTC derivative counter party contracts has blown wide open, Hatzius' somewhat sanguine and disingenuous assessment of "the pattern should look more encouraging than in 2010" is little more than a whimper in a howling gale of approaching Cat 5 hurricane. Batten down the hatches.
Excellent assessment. If anything, the financial crisis is staring us in the face, rather than to be viewed in the rear view mirror. The waves of criminal conduct just keep coming; it seems each one larger than the one before. Much of the QE2 talk, IMO, is to hold optimism for Democrat stimulus at least for three weeks more until elections that will determine likely congressional committee chairmen. This may well be the last carrot dangled in front of the donkey. anticipating his vote for a binfull of more free stimulus carrots.
This election season has certainly been one for the record books: doctored job reports to keep the 9.6 figure (no worse), free-rent promises from the Administration, and the almost unbelievable spectacle of dragging a Palestinian U.S. puppet and an Israeli warmonger to negotiate peace in Palestine at least until after the mid-term vote.
It’s too bad that Goldman’s fox only talks about needing more chickens to massacre over the next five years and doesn’t mention the past years of chicken massacre initiated by the Federal Reserve.
So all along, Goldman has had a five year plan? Who knew?
My vote is for austerity, it would be faster (perhaps more painful) but austerity works...instead we're going to die a death by 1000 cuts in stead of a dagger to the chest.
our older generation will be wiped out. they saved & saved fiat money for their old age & it will just evaporate. how the hell will they even pay for their utility bill & food ! the whole thing is just a damn outrage. Does anyone else remember going to the bank when we were teenagers, making a deposit into our savings account & the bank teller would take out a little rubber stamper, ink the stamper on an ink pad & just STAMP IN OUR NEW BALANCE on a savings passbook ?
Another approach -- fed may announce a staged program -- we will buy whatever it takes qquarter by quarter. This will cover everyones ass. They can buy more if they need to and buy less if they need to, or if there is no consensus. Maybe they announce the first figure -- $250 BLN remainder of 2010 or something so as not to freak out markets. But someone above is right they may get spooked by the unintended consequences (ie commodity inflation while wage deflation continues -- ie lower standard of living) so they have to tread carefully.
I agree with other posts - the QE will not bring about jobs. It will inflate assets and this is not great for the US. But dont fight the tape. Just trade and invest. Right is a totally different matter.
An estimated 50% of FRNs are held outside the US. What happens when Joe Borski and Francois Fu get out of greenbacks before they take another 20% down? And if the world is repudiating the dollar what does Ben do to keep the mob from leading him to the guillotine?
It should be quite obvious that the mob is Ben while taxpayers get the guillotine.
This is what Ben has always wanted. To play out his most danergous experiment in real time. To ensure that hundreds of future economins books and history books are written about his undertakings.
It is simply vanity. In his version he believes they will write how Bernanke proved once and for all that Keynesiasm Voodo when implemented on a scale parallel to insanity that the world can indeed be saved.
He also has hopes of his record unprecedented actions leading to the conferring of a new name.
Bernankinomics.
Bernanke is now more powerful that the President. I'm sure the founders had this in mind
Right as rain. Obummer has been fired, but he will never admit it. He won't get a resolution in favor of the girl scouts through Congress, so stupid pet tricks of the fed are his only real option. We are now officially, guinea pigs of the fed, and Soviet style central planning.
How hard is it to gain citizenship in Tahiti?
Black Swan sez: ZIRP ZIRP ZIRP
The bets that QE2 won't be inflationary keep doubling up. No rate rise till 2015, so go long those junk bonds! How about some 20-year, 30-year or 50-year corporates, those should be even better! Look out for some serious havoc when these bets go bad. I'd say by the end of next year.
http://keynesianfailure.wordpress.com/2010/09/24/why-this-time-qe-really-will-spur-inflation/
http://keynesianfailure.wordpress.com/2010/09/10/delayed-deleveraging-meets-the-keynesian-endpoint/
Fraud: 4,219,817,642,024
US Citizen: 0
stupid asshole thinks everybOdy is clueless as he seems
# perhaps $100bn until their inflation forecast returns to levels closer to their mandate.
inflation.. INFLATION MY ASS...
FED DONT GIVE #UCK ABOUT INFLATION.DEFLATION/ETC
NOW fed cares only about FEDERL DEFICIT.. and guess
what MOTNHLY DEFICIT IS EXACTLY 130-140 bln .. so does anybody think
THERE'S ANYBODY WHO GOT 150 BLN PER EACH AND EVERY MONTH TO fund federal deficit..
this is the nd folks.. net year its gonan be 200 bln per month... id give 2-3 max years before whole thing blows off..
be ready
alx
Did anyone else catch Ben's speech on 10/4, and then Gary North's take on the speech.
Basically it appears that Ben may have been giving an ultimatum on US fiscal responsibility to Congress and that there IS an endpoint to FED intervention and loaning the US money (or issuing IOMe's???).
Diva Ben's aria:
http://federalreserve.gov/newsevents/speech/bernanke20101004a.htm
http://www.lewrockwell.com/north/north892.html
Goldman: "Now that we're guaranteed to make obscene amounts of money, our only worry is how to count it all!"
ZIRP4EVA
Good to know we'll all be millionaires. Slumming it for me though, I already have in my hands several 100 trillion Zimbabwe dollars to buy out all the lower-middle class millionaires out.
"until their inflation forecast returns to levels closer to their mandate."
Their mandate is price stability, isn't what we have now? or at least we a closer to it than anytime in the last 50 yrs.
QE2 sounds like a done deal as CNBC reported today and i think the only question is "can they not do it?" the only other "solution" being presented is by moving to have Hillary as VP just as the Middle East peace process is under way we as the USA may now skip "directly to war." Substitute the Jewish state for France of the Cold War and simply state "how many Americans do we need here? Only one." Talk about the tail wagging the dog. So why not shakedown the National Security Council for your "couple of trillion you lost while securitizing all of America"? As far as the Prez is concerned "they're the money" so there you have it, there you are.
Hey, what happened to all the talk about the exit strategy? They tested it and everything! You mean they're not going to exit? Get the fuck out of here!
You misunderestimated:
In Zimbamaland, it is the productive class that is expected to exit;)
Ben's great idea :
US public debt =
$13.616 Trillion
Each citizen's share of this debt is $44,077
QE2 to trash $US until
US public debt =
13.616 TN worthless US dollars
Each citizen makes a cool $44,077
Where's the catch ?
Oh right, we have to use the same worthless dollars to buy food and other luxuries.
We haven't heard the term "Crack up boom" mentioned .....Yet.
Get in early while you can with your own frn's.
We haven't heard the term "Crack up boom" mentioned .....Yet.
Get in early while you can with your own frn's.
Why do QE 2.0?....................
When ONE TRILLION of QE 1.0 is still sitting, with NO TAKERS?.
ucvhost is a leading web site hosting service provider that is known to provide reliable and affordable hosting packages to customers. cheap vps company believes in providing absolute and superior control to the customer as well as complete security and flexibility through its many packages................ windows vps Moreover, the company provides technical support as well as customer service 24x7, in order to enable its customer price. Thanks forex vps | cheap hosting