Research (Investicniweb.cz)
Macroeconomics  |  September 14, 2012 21:46:21

QE3: Unclear benefits for the economy and the mystery in Bernanke's head



Expansionary monetary policy in the form of bond purchases by the central bank (de facto financed by printing money) can take a long time. Maybe forever. Fed intends to buy bonds funding mortgage (MBS) for $ 40 billion a month, until the steady improvement in the situation on the U.S. labor market. It is even more ready to intervene if it does not jeopardize its long-term inflation target of 2%.

Fed is a permanent increase in employment. This is still low, despite declining unemployment rate. It can be measured only with people who have a job or are actively looking.

Employment in USA

Support the economy through higher asset prices

Bernanke press conference reiterated several times that he believes that higher stock prices and real estate, which should trigger QE3 and ensure that promote the consumption of Americans. How? This will increase the wealth and supposedly they have a greater appetite to spend.

It's a bit like when the manager decides to launch a company repurchase its shares. The share price is supported by this demand, the stock market value of the company grows. Fine.It could of course have a positive impact on its fundamental business - increase the trust of business partners and other investors, the company indicates that it has enough money. It may or may not. When the company has enough money, why not invest in better innovation, new products and services?

Fed chief and at least part of the investment community once again showed how (not) mean the market. Rising stock prices are not the result of anything more than the sum of decisions of various market participants, who are often based on speculative motives and misinformation decisions in their own interests.

We will see

Another result of QE3 announcement is the U.S. dollar above the 1.3 EURUSD. Reacted negatively and long-term U.S. bond yields, which have reached over 1.8%. While long-term rates are comparative basis for long-term loans in the entire U.S. economy. Really expensive loan will support the U.S. economy, hence employment? We shall see.

EURUSD

Apart from that, hand in hand with growth stocks will draw pulses of QE3 also commodities - oil WTI is above $ 100 per barrel in the last stages of QE3 grew significantly and the price of copper. Expensive oil, and therefore expensive gasoline to support the American consumer? We shall see.

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QE3: Nejasný přínos pro ekonomiku a záhada v Bernankeho hlavě

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