Archive for October 22, 2013

2013/10/22: Commentary: QE-Infinity. Good for what ails you…

October 22, 2013 Leave a comment

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COMMENTARY: Tuesday, October 22, 2013.

QE-Infinity.  Good for what ails you…


 …unless you’re the US dollar.

The current situation is easy to assess, even if there are seeming inconsistencies with the classical intermarket influences. And it all boils down to the Fed’s seemingly endless commitment to QE… as in QE-Infinity. It shows up in the multi-asset class response to the quite a bit weaker than expected US Employment report today.


And that is all laid out quite clearly by one of the dominant doves (or is that a contradiction in terms?) Chicago Fed President Charles Evens was interviewed by Steve Liesman on CNBC early Monday, and we had already incorporated his views in the top of the week Trendview Video analysis from yesterday morning. He seems to clearly articulate what all of the doves (and those who are neither expecting nor necessarily want any reform in Washington DC) have already implied:

Quantitative Easing to a maximum degree that many joked was Buzz Lightyear Bernanke’s plan to take QE to ‘infinity and beyond” is indeed edging toward ‘QE-Infinity’. While the near-term influences driving that indeed seem rational, where in the world (or more appropriately the whole universe) does the Fed find the rationale to stop?

Two questions came up in the interview that are not part of the concise video synopsis. The first is whether the Fed will actually still be able to stop QE altogether by mid-2014 as it seemed to imply previous, and many expect. That was merely dodged.

Yet more important was Liesman’s pointed question on whether there is a practical limit to the size of the Fed’s balance sheet? It was especially telling in that he even cited levels like $5 trillion? $12 trillion? The almost incredible answer…

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