The U.S. Federal Reserve runs the danger of diminishing returns from its up coming round of money printing to continue the subdued financial recovery, but that won’t stop it from trying it anyway. Quantitative easing, which is what they will probably try, is starting to create division within the fed leaders. Investors, of course, assume that the fed will do it. I saw that the Reuters poll of dealers that actually use the window, expect this to happen, no doubt. This is expected at the 11/2/2010 meeting.
Unemployment continues to hover around 10%, so it is obvious that companies have not grown enough to grow jobs to lower the unemployment rate. However, the silver lining is that we are not still losing jobs in droves.
If inflation can stay low for an extended period, this will just help the overall consumer recover that much quicker and grow our economy that much faster/
The U.S. inflation data comes Thursday and Friday, and is most likely to show price pressures remain low, particularly for consumers. Of course, continued low inflation raises issues about the threat of deflation, a vicious circle of a downward spiral consumer costs and the economy as a whole. Deflation is as bad as inflation because governments are impacted by tax revenue and it is a vicious vicious cycle.
The Fed has held interest rates near zero since 12/2008, and has been buying assets since around then also. It’s balance of assets is over two trillion dollars. Ouch.
The great result is that we averted a disastrous depression and the failing of thousands of banks and companies. Also, 30% unemployment was definitely in the cards during that time.
So, given that the government is still working so hard to keep things afloat, should I be buying stocks at my stock broker firm? I think so. The US government has already proved that it is going to do everything it takes to save the economy and firms that are ‘too big to fail’. In addition, things really are not that bad. Have you been in a Costco lately?
