Monetary News Oct. 25-29

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News
FRIDAY
Why the Fed's bold move won't work
The Federal Reserve is likely to announce a plan to pump more money into the economy next week. But some economists worry that the move won't work.
Not by monetary policy alone
Another dose of “quantitative easing” is necessary; but it will not, by itself, revive America’s economy.
No double-dip recession
After completing an exhaustive review of key drivers of the business cycle, ranging from credit to inventories and measures of labor market conditions, we can forecast with confidence that the economy will avoid a double dip.
Dollar lower again as investors wait for Fed
Currency investors are bracing for dynamic changes to monetary and fiscal policy that could come next week.

THURSDAY
Dollar Falls on Speculation Fed Quantitative Easing Will Debase Greenback
The dollar fell against all of its most-traded counterparts on renewed demand for higher-returning assets as traders speculated the Federal Reserve will debase the currency by buying government debt.
U.S. Easing to Hurt Developing Nations, China Researcher Writes
Quantitative easing in the U.S. will “seriously damage” the interests of developing nations, spuring inflation and pushing up asset prices in emerging economies, Lu Haiqi, a researcher with China’s National Bureau of Statistics, wrote in an article published in today’s Shanghai Securities News.
Fuel card news: US quantitative easing 'could boost oil prices'
Analysts have predicted that any decision by the US Federal Reserve to embark on a second round of quantitative easing could result in persistently high oil prices next year, it has been revealed.
Report suggests Fed to buy $250 billion under QE
A published report suggesting the Federal Reserve will kick off its latest program of quantitative easing by purchasing $250 billion worth of bonds over three months took some life out of markets Wednesday, hurting stock futures and other assets.

WEDNESDAY
Fed Gears Up for Stimulus
Eyes Gradual Bond Buying of Several Hundred Billion Dollars; Doubts Linger.
Fed looks set for new round of monetary easing
The Federal Reserve looks set to embark on a hotly debated second round of monetary easing next week, but much uncertainty surrounds the scope and pace of bond purchases by the U.S. central bank.
Bonds: Two-year Treasurys at record low
Bonds' rate was just 0.40 percent, the lowest yield ever for a two-year auction of US Treasury bonds.

TUESDAY
Dollar Gains Against Euro on Speculation Fed Easing Will Spark Inflation
The dollar rose against the euro on speculation an increase in debt purchases by the Federal Reserve will cause inflation to accelerate.
Yields on TIPS Go Negative
Big Demand for Bonds Suggests Fed Is Winning Deflation Battle; It 'Is Striking'.
Bernanke Asset Purchases Risk Unleashing 1970s Inflation Genie
For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.
Treasury Draws Negative Yield for First Time During TIPS Sale
The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Federal Reserve will be successful in sparking inflation.
Dollar doldrums: No end in sight
The greenback slipped once again Monday morning, falling to a new 15-year low against the yen. The dollar also fell against the euro and pound.

MONDAY
Here's Ben Bernanke's Big Speech On The State of Housing Finance
The Fed is looking into the foreclosure crisis.
Dollar Hit After G20 Statement; Risk Returns
The dollar fell broadly against all major rivals Monday after the Group of 20 nations agreed over the weekend to avoid "competitive devaluation" of their currencies.
Treasury Shields Citigroup as Deletions Undercut Disclosure
From the 2008 Bear Stearns Cos. rescue to the Federal Reserve’s policy of quantitative easing in 2010, the Obama administration has delayed disclosures and defended its right to secrecy in court.
Germany Accuses US of Indirectly Manipulating Dollar
German Economy Minister Rainer Bruederle on Saturday took issue with what he called a U.S. policy of increasing liquidity, saying it indirectly manipulated exchange rates.
IMF power shift opens way for more breakthroughs
A G20 agreement to give emerging market countries more power in the International Monetary Fund opens the door for breakthroughs on easing global tensions over trade imbalances.
What Britain's deep budget cuts mean for its future prosperity
Britain's left warns that the country's social fabric will unravel under the deep budget cuts announced today, while conservatives see a new society emerging.
Dollar at Risk of Becoming 'Toxic Waste'
The dollar's slump could get far worse if the dollar index takes out last year's low.

Economists Comments
FRIDAY
What Bernanke thinks
I'm not sure Mr Bernanke's calculation is off, in this case. He zealously guards the independence of the Fed, and he may well be wary that the insertion of his nose into Congress' business would invite more Congressional meddling in his affairs. Mr Bernanke may also be conscious of the continuing political potency of attacks on Fed-orchestrated bail-outs.
Banks Are Lending More (to the Government)
The Federal Reserve's open-market committee (FOMC) is widely expected to try a second dose of "quantitative easing" when they meet again in early November. Dozens of financial reporters have described this as an effort to "goose" the economy, but how that is supposed to work is even more unclear than usual.

THURSDAY
Gold vs. the Fed: The Record Is Clear
There were no world-wide financial crises of major magnitude during the Bretton Woods era from 1947 to 1971.
Kass: QE 2 Is a Con Game
As Halloween, the midterm elections and quantitative wheezing approach over the next week, some strange and spooky developments have occurred:
QE2 a ‘Ponzi scheme’, says Pimco’s Gross
The Federal Reserve’s highly anticipated plan to engage in quantitative easing to pump money into the economy is a “Ponzi scheme,” said Bill Gross, who manages the world’s biggest bond fund for Pimco.
Mad Fed Should Beware Unquantifiable Outcomes: Mark Gilbert
The worrisome thing about so-called quantitative easing in central banking is that its consequences remain unquantifiable, and and the perceived need for more central-bank purchases of securities should make investors uneasy.
Stocks Rise or Sink on QE2's Expected Size
Hints that the Fed's quantitative easing may be restrained sent stocks lower.
The curious anti-QE crowd
I understand the argument that there are limits to what a new round of quantitative easing can accomplish. That seems like a reasonable claim to me, and while I'm not exactly sure what the ideal mix of monetary and fiscal stimulus is, I'm prepared to accept that the fiscal share is greater than zero. What I have trouble understanding is the view that new monetary easing is likely to be counterproductive.

WEDNESDAY
QE2: More Harm Than Good
Large multinational firms will be able to deal with a weaker dollar, but a second round of quantitative easing will be overwhelming for small businesses, the core of our economy.
QEII, Like QEI, Isn't Monetary Ease
Unfortunately for Bernanke & Co. simply adding liquidity to an economic system does not promote growth. In fact, the relationship is reversed: it is new demand that stimulates the need for new liquidity, not liquidity that sparks demand.
Foreclosure-Gate, Dollar Rally, and the Banking Sector
Todd Harrison on what's in store this week for the market.
Goldman Says Fed May Need To Print $4 Trillion To Start Inflation
The Fed is on the cusp of embarking on money printing QE2 to stimulate the economy. The data is still very weak and I think QE2 will happen. I still see stagflation in our future as capital is continuing to be destroyed and yet the dollar gets weaker. Germany is recovering, the UK is embarked on reining in spending which will lead to recovery, China is tightening, Japan is mixed as is the rest of the EU.

TUESDAY
Bernanke Leaps into a Liquidity Trap
In the Hicksian interpretation of the liquidity trap, monetary policy transmits its effect on the real economy by way of interest rates. In that view, the loss of monetary control occurs because at some point, a further reduction of interest rates fails to stimulate additional demand for capital investment.
Preparing for QE2: Three Possible Scenarios to Follow the Fed's Announcement
Investors have big decisions to make as markets prepare for details of the second round of quantitative easing.
Fed Is Wrong in Thinking Inflation Will Solve Unemployment
Each increase in inflation was followed five quarters later by a decrease in normalized employment growth.
Quantitative easing: The numberless oblivion
The world seems full of smoke ahead of a world currency war. The weapon of choice is quantitative easing, a.k.a. QE. If you print a trillion, I’ll print a trillion. Of course, he and she will too. No change in exchange rates after a trillion? Let’s do it again, QE2.
A fistful of dollars and nowhere to go in Asia
The tasting menu on display outside the Japanese restaurant at the Westin Hotel in Tokyo had all the treats a foodie from San Francisco would expect from a Western business hotel in Japan’s capital: fine rare tuna sashimi, fabulous beef and wine pairings for each of the handful of items. Then I saw the price: more than 53,000 yen, or more than $650.
Fed fights the easy-money fight
The Federal Reserve plan to gin up the printing press in an effort to knock down long-term interest rates is one of the most well-signaled roundhouse punches in the history of finance.

MONDAY
Currency market: Fix the rules. Avoid a trade war.
Currency market adjustments are a major focus of Friday's G-20 meeting of finance ministers and central bankers.
QE2 — The Fed’s Plan for Job Growth Could Backfire
On Wall Street, they call it QE2, short for a second round of quantitative easing by the Federal Reserve. By all signs, the Fed is ready once again to begin buying large quantities of assets such as Treasury notes. But what will it mean for Main Street? After all, the ultimate measure of the policy’s success will be whether or not it boosts economic growth and creates jobs.
Why the Fed Wants a Tad More Inflation
For much of the past generation, Federal Reserve officials have been focused on an overarching long-run goal: Get inflation down and keep it there. Now Fed officials want to get inflation a bit higher.
Monetary Steroids
The Fed prepares to administer a dose of monetary easing that could be harmful to the body economic. Wouldn't DHEAS be better, Mr. Bernanke?

Blogs
FRIDAY
The Week in QE2 Debates
Financial professionals with every perspective weighed in. Here, Minyanville offers a recap of this week's hottest debate.
The FOMC: Help Wanted
Policymakers look to the Street for guidance.
I'll Side with Mises: Would Friedman's Logic Lead Us to QE2?
I remain unpersuaded that any of these arguments for QE have the upper-hand either analytically or political economy wise.

WEDNESDAY
Where are the biggest “imbalances?”
Do any of these “imbalances” actually hurt the US?  Of course not, the Fed determines our NGDP.  But I thought it would be interesting to identify the villains, in case you do think it is a problem.

TUESDAY
Focus on the real
China's inflation rate is well above America's. That's just as important in determining export competitiveness as movements in the nominal exchange rate.
Expectations, Dallas Fed Manufacturing, HAMP and Foreclosure-Gate
The Dallas Fed released the regional manufacturing survey this morning: Texas Manufacturing Activity Expands and Business Conditions Improve
Negative Real Rates of Return
Inflation protected securities sold at negative yields for the first time ever on Monday as traders anticipate that the Federal Reserve will start a new round of asset purchases.
Fed QE and Historical Analysis Both Reveal Gold is Better Than Bonds and Stocks
Right now, the economy looks like more of the same-old, same-old mode: stagflation for the foreseeable future.
Is Chinese Protectionism Good for the US?
A simple cost-benefit analysis proves that the Chinese policy of suppressing the value of its currency produces a very large net loss of income to American citizens.

MONDAY
Fed, Bernanke Detail Response to Foreclosure Crisis
The U.S. Federal Reserve presented a report detailing its efforts to help Americans cope with the foreclosure crisis, and Chairman Ben Bernanke said in a speech that federal banking regulators expect preliminary results of their review of the nation’s latest foreclosure mess to be ready next month.
Big Boost From Dollar Decline
Consider the recent fall in the dollar. Since August 27, when Federal Reserve Chairman Ben Bernanke signaled the central bank was likely to pump more dollars into the economy, the greenback’s value has fallen about 4.8% against the currencies of U.S. trading partners.
Is Quantitative Easing Just Masking the Depression Symptoms?
The Federal Reserve is likely to pull the trigger on a new round of monetary stimulus, but its impact remains in question.
The Depression Within the Depression
Until consumer expenditures are narrowed to a level that leads to a sustainable balanced economy, the current depression will continue indefinitely.

Reports
TUESDAY
The Fed’s QE2 and the Economy: Sailing to Safety or a Ship of Fools?
Quantitative easing is a largely experimental tool employed by the Federal Reserve to address a continuing sluggish economy and the renewed potential of deflation. That the Fed faces this prospect is final proof positive that President Barack Obama’s Keynesian stimulus policies have failed, leaving monetary policy as the sole remaining major stimulus tool.
The Great Recession and Its Aftermath from a Monetary Equilibrium Perspective
Modern macroeconomists in the Austrian tradition can be divided into two groups: Rothbardians and monetary equilibrium (ME) theorists. The name for the latter is somewhat misleading, however, as both groups argue that monetary equilibrium is ultimately achieved where the quantity of money supplied equals the quantity of money demanded.