Wednesday, October 27, 2010

WSJ Thinks $500 Billion in QE2 is Bernanke Using a Water Gun

WSJ's Kelly Evans tweets:

Hilsenrath kills markets. Fed using water gun, not bazooka. - Fed Gears Up for Stimulus
For those keeping track at home, I repeat, a $500 billion creation of supermoney by the Fed over six months, results in an 11.6% M2 money growth (if the funds don't end up as excess reserves). Further money supply is already growing at 5%. That's total money growth over the next six months of 16.6%!
And that doesn't include any potential money multiplier effect, which could easily boost M2 growth over 25% on an annualized rate. Some water gun.

Evans and Bernanke must pray at the same Hounfour.


  1. U.S. stk mkts have probably added 1 - 2 Trillion in value since the Fed announced QE2; add the increase in commodities, & foreign mkts, so if the Fed "ONLY" does $500 billion, that will not even support the advances already made.

    A minor contraction in asset prices, including housing world-wide, & the Fed's $500 billion is a drop in the bucket. (US housing value about 17 trillion; US stocks 22 trillion; world stocks another 25 T, etc.)

    Baby boomers will continue to de-leverage -- they must.

    And ironically, as long as Fed keeps zero rate policy, U.S. savers (consumers,) will be ve
    ry careful in spending.

    Don't get me wrong: Fed actions will distort production process, but that will not necessarily result in massively higher asset prices from these levels (copper, crude, etc,) nor necessarily in yet higher consumer nominal prices.

  2. RW- how can I chart this on Fred to compare your possible annualized m2 growth to historical? NSA?, SA? Ideas?