Goldman Pulls The Plug On More QE In 2012

Tyler Durden's picture


One of the most vocal advocates of a NEW QE announcement next month, at either the FOMC meeting or Jackson Hole - Goldman Sachs - has just pulled the plug. From Jan Hatzius: "The US economic data continue to look a bit stronger. Tuesday’s retail sales report for July beat expectations, while inventory accumulation showed a further slowdown in June. Our Q3 GDP tracking estimate edged up to 2.3%. The recent news also has implications for Fed policy. While QE3 at the September 12-13 FOMC meeting remains possible, our best estimate is that it will take until late 2012/early 2013 before Fed officials return to balance sheet expansion." Just as we have been saying. Which means the Fed is now out of the picture until the end of 2012. And with corn prices where they are, so is the PBOC. As for the ECB - talk to Rajoy, who will do nothing as long as 10 Year yields are under 8%. Which means that, as explained previously, Spain and Italy, and in fact the entire world, must all be destroyed first, before they are saved.

Full Goldman note:

The US economic recovery remains sluggish, but we believe that it will pick up a bit in coming months. Tuesday’s data were generally in line with this expectation:


1.    Stronger retail sales. The July retail sales report showed a clear upside surprise, with a 0.9% gain in sales excluding autos, building materials, and gasoline. The month-to-month strength was broad-based, with sizable gains in most core categories, although it mainly served to reverse some of the declines in the prior month.


2.    Slower inventory accumulation. Inventory accumulation has slowed clearly in recent months, with book-value business inventories up just 0.1% in June, down from a peak of 0.8% in January. We believe that this slowdown has been partly responsible for the disappointing performance in manufacturing surveys such as the ISM and Philly Fed. If it is ending, that should help the manufacturing sector over the next few months.


Our proprietary measures of US economic growth have also picked up a bit further. Our Q3 GDP tracking estimate rose to 2.3% from 2.2%, our current activity indicator (CAI) now stands at 1.2% in July after 1.1% in June, and our US-MAP index of US economic data surprises is moving quickly further toward neutral readings on a 60-day exponential moving average basis.


The recent news on the pace of the recovery also has implications for Federal Reserve policy. To be clear, our own view remains that there is a very solid case for additional accommodation under the Fed’s dual mandate of maximum employment and 2% inflation. And we do believe that Fed officials will ultimately decide to ease policy further.


However, in contrast to a number of other forecasters, we do not expect a move to QE3 at the September 12-13 FOMC meeting. Although Fed officials clearly adopted a strong easing bias at the July 31-August 1 FOMC meeting, we do not think that this amounts to a pre-commitment to QE3. Instead, we believe that continued weakness is necessary to prompt a substantial easing move. And so far, that weakness is not showing up in the data. Among the top-tier indicators released since the meeting, only the July ISM manufacturing index was a (modest) disappointment. In contrast, the July employment report was at worst a split verdict, the July nonmanufacturing ISM was a bit better than expected, jobless claims have surprised on the low side over the past few weeks, the June trade deficit showed an unexpected decline, and the July retail sales report surprised on the upside.


Other factors have also, at the margin, swung against the expectation of aggressive near-term easing. The inflation outlook has become a bit cloudier in the wake of the recent recovery in commodity prices; while Tuesday’s upside surprise on producer prices was largely driven by volatile sectors such as vehicles and tobacco, underlying price pressures were also a touch firmer than we had expected. Moreover, our GS financial conditions index has now fully unwound the tightening seen in the second quarter, and we have found previously that the meeting-by-meeting probability of Fed easing is quite sensitive to financial conditions.


To be sure, the uncertainty around the near-term trajectory of Fed policy remains substantial. Several FOMC meeting participants, specifically Presidents Evans, Rosengren, and Williams, are making the case for additional easing via potentially open-ended balance sheet expansion. And it might well be that Chairman Bernanke will use his speech at the upcoming Jackson Hole Symposium to explain why the Fed’s mandate calls for further accommodation in the near term. We will be receptive to these messages and will review our monetary policy forecasts as needed. But our call remains that the return to QE will not happen until late 2012/early 2013, and at the margin the recent data have made us a bit more confident.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 08/15/2012 - 06:32 | 2706109 ziggy59
ziggy59's picture

Soooo, if GS says no QE2012, should we expect it now?

Wed, 08/15/2012 - 06:34 | 2706110 GetZeeGold
GetZeeGold's picture



OK....if we're not printing are we going to pay for all that crap again?


Wed, 08/15/2012 - 06:44 | 2706116 Comay Mierda
Comay Mierda's picture

if you wanna laugh ask that question to a libtard obamatron

deer in the headlights look 

and i dont think any cnbc guest has ever asked liesman that, or any of the other spinmeisters

Wed, 08/15/2012 - 07:45 | 2706170 malikai
malikai's picture
"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."   --  Thomas Jefferson
Wed, 08/15/2012 - 07:49 | 2706174 Comay Mierda
Comay Mierda's picture

you, sir, are a terrorist!

Wed, 08/15/2012 - 07:56 | 2706185 ArkansasAngie
ArkansasAngie's picture

Well now ... One man's terrorist is another's hero.

Wed, 08/15/2012 - 07:02 | 2706132 cossack55
cossack55's picture

Three options:

virtual money

implied money

digital money

Wed, 08/15/2012 - 07:11 | 2706143 GetZeeGold
GetZeeGold's picture





Press "00"


Press "enter"


Problem solved

Wed, 08/15/2012 - 06:38 | 2706112 Gavrikon
Gavrikon's picture

Better buy gold now.  GS is obviously going to be doing it behind the scenes.

Wed, 08/15/2012 - 06:41 | 2706117 GetZeeGold
GetZeeGold's picture



Cheese it Jeeves.....the Muppets are on to us.


Wed, 08/15/2012 - 06:44 | 2706120 TrillionDollarBoner
TrillionDollarBoner's picture

Suddenly looks a helluva lot more likely...

Wed, 08/15/2012 - 08:11 | 2706233 TrumpXVI
TrumpXVI's picture

Precisely, ziggy.  If I've been payin' attention in class, that's my take.

Wed, 08/15/2012 - 06:38 | 2706113 LULZBank
LULZBank's picture

and in fact the entire world, must all be destroyed first, before they are saved.


I thought that money printing was destroying the world, not the lack of?!

Wed, 08/15/2012 - 07:03 | 2706134 cossack55
cossack55's picture

Thats why all you own is a house on Baltic Ave.

Wed, 08/15/2012 - 07:21 | 2706155 LULZBank
LULZBank's picture

I'd prefer the bank.

QE never stopped, just sponging up the excess liquidity by PM and market manipulations is being given a break till Dec.

Wed, 08/15/2012 - 06:42 | 2706118 Sequitur
Sequitur's picture

Don't fret. I've got some accounts I can tap to help prop the U.S.S. Titanic. Gensler and Chilton gave me the green light.

- John Corzine.

Wed, 08/15/2012 - 07:35 | 2706123 GetZeeGold
GetZeeGold's picture



Why couldn't I have been more like Jon Corzine....where did I go wrong - Bernie Madoff


Have you learned anything from this Johnny? Crime doesn't pay unless you own a politician. Invest the's totally worth it.


Wed, 08/15/2012 - 14:13 | 2707456 MisterMousePotato
MisterMousePotato's picture

Gov. Arnold Schwarzenegger on Sunday commuted the manslaughter sentence of the son of California's former Assembly speaker, drawing criticism from the victim's family.

The move came just hours before Schwarzenegger was scheduled to leave office.


Wed, 08/15/2012 - 06:53 | 2706121 lolmao500
lolmao500's picture

No QE possible later on... Iran war will be on. Especially with this kind of crap in the news...

Obama set to assure Israel that, if all else fails, US will attack Iran by June 2013

Iran attack would drive up gasoline and electricity prices

Morsi reportedly mulls amending peace treaty with Israel

Wed, 08/15/2012 - 06:46 | 2706122 Headbanger
Headbanger's picture


Wed, 08/15/2012 - 06:49 | 2706126 IronShield
IronShield's picture

GS isn't really making such a great leap here as it would be too obvious for QEx to be implemented in September.  And the PTB don't exactly do the obvious things now do they?  And if they did, why aren't we/you all rich?  If this comes to pass, then this will be reflected in (substantially?) lower markets and PM prices.  IMHO.  And of course, I will keep stacking.  ;-)

Wed, 08/15/2012 - 06:50 | 2706127 hugovanderbubble
hugovanderbubble's picture

All this stuff sounds like " DISTRIBUTION " SELL TIME,

Wed, 08/15/2012 - 06:54 | 2706128 Hobbleknee
Hobbleknee's picture

Does anyone really believe QE ever stopped?

Wed, 08/15/2012 - 06:58 | 2706130 LULZBank
LULZBank's picture

Yes, FED only went as far as QE2 and there are check and balances in the system for any unauthorised actions, by the democratic institutions.

If I had a money printing machine at home, I would never print without permission.

Wed, 08/15/2012 - 07:00 | 2706131 GetZeeGold
GetZeeGold's picture



Thank goodness for checks and means we can totally ignore GAAP.



Wed, 08/15/2012 - 07:04 | 2706136 cossack55
cossack55's picture

Duhhhh.....whats a FASB?

Wed, 08/15/2012 - 07:18 | 2706151 LULZBank
LULZBank's picture

Its stuff... err you know... stuff like Sarbanes Oxley... until its down the shredder.. hmmkay?

Wed, 08/15/2012 - 07:09 | 2706133 TWSceptic
TWSceptic's picture

Bernanke is doing stealth QE right now, there's no benefit for the fed in doing more at this time.

Wed, 08/15/2012 - 07:41 | 2706165 mendigo
mendigo's picture

Major data manipulation on the run up to the election is likely.
When you print yor own money I think spending beyod your means and money printing are pretty much equivalent - no need to anounce that we will be spending more than we take in this month or next.

Wed, 08/15/2012 - 07:52 | 2706180 Quinvarius
Quinvarius's picture

This means QE by the end of the month.  I mean the kind they talk about.  Not just the kind they are doing in ever increasing amounts but don't mention.

Wed, 08/15/2012 - 08:53 | 2706337 laozi
laozi's picture

If you look at the stock market since July it sure looks like stimulus is coming. But still, I really can't tell anymore...

Wed, 08/15/2012 - 08:13 | 2706211 Freebird
Freebird's picture

Europe first. "Stand & deliver" - Ben the Highwayman

Wed, 08/15/2012 - 10:07 | 2706569 ElvisDog
ElvisDog's picture

The GS announcement is the worst news the Obama/Biden 2012 team has had in months. GS speaks for the rest of the big-boy bankers (head of the 5 families). Makes me wonder if an October financial surprise is in the offing....

Do NOT follow this link or you will be banned from the site!