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Qe2 In Round Trillions - If Bernanke Does The Following We'll All Be...

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http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007647/qe2-in-round-trillions/

Here is a back-of-an-envelope guess by David Greenlaw at Morgan Stanley on what the Fed can expect from a second blitz of bond purchases, or `Shock & Awe’ as he calls it.

If Ben Bernanke does a further $2 trillion (on top of the $1.7 trillion already in the bag) the yield on 10-year US Treasuries will drop 50 basis points to around 2.2pc.

GDP growth will be 0.3pc higher than otherwise in 2011 and 0.4pc higher in 2012.

The unemployment rate will be 0.3pc lower in 2011 and 0.5pc lower in 2012 — (in other words drop from 9.6pc to 9.1pc, ceteris paribus).

That looks like trivial returns for a collosal adventure into the unknown, with risks of dollar flight and mounting Chinese suspicions that the US intends to default on its external debts by debasement.

I had dinner recently with a former Goldman Sachs hedge fund guru, and while I can’t remember the exact details through a fog of Mersault Premier Cru, I am pretty sure he said it would take $30 trillion to do the job – given the scale of wealth destruction from the US property crash and ferocity of debt deleveraging still to come.

We will find out tomorrow whether Fed hawks from such districts as Dallas, Richmond, Kansas, and Philadelphia are really willing to sign off so soon on the next helicopter drop. It seems very strange that they should do so when the official line is that there will be no economic double-dip, and that this Summer’s slowdown is just a mid-cycle correction.

Bernanke said at Jackson Hole that the Fed would hit the button “if the outlook were to deteriorate significantly”. Has that standard been met? I happen to think that the underlying conditions have been buckling for months – if you look at forward-looking indicators rather than backward-looking indicators (the internals of the ISM for example) – and that the economy is slowing to stall speed as the inventory boost wears off, housing support is snatched away, and fiscal tightening bites.

BUT THAT IS NOT THE FED’S STATED VIEW. If it were to sign off on fresh QE as cavalierly as some analysts seem to suppose, it would invite ridicule. Such action would suggest there really is a Bernanke Put, a safety net for asset prices, investors, and the rich.

Economics is so easy just create money out of thin air and you get growth and lower unemployment all with free funny money.

And for printing a mere $30tr you get to fix all the problem.

Printy printy.

This time next year Rodders we'll all be billionaires.

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http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007647/qe2-in-round-trillions/

Economics is so easy just create money out of thin air and you get growth and lower unemployment all with free funny money.

And for printing a mere $30tr you get to fix all the problem.

Printy printy.

This time next year Rodders we'll all be billionaires.

The world is our lobster.

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"That looks like trivial returns for a collosal adventure into the unknown, with risks of dollar flight and mounting Chinese suspicions that the US intends to default on its external debts by debasement."---and what Chinese gov will do, nuke them? Hmm, actually....possible? :blink:

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"That looks like trivial returns for a collosal adventure into the unknown, with risks of dollar flight and mounting Chinese suspicions that the US intends to default on its external debts by debasement."---and what Chinese gov will do, nuke them? Hmm, actually....possible? :blink:

That would just be MAD.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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