QE2

Hopefully they don't change the term limit rules.

 

PPI went DOWN, inflation risk is very low.

 

Think they are concerned with deflation more now though.

Not sure how they read inflation these days. If you devalue a currency then oil, thus gas, goes up and when gas goes up food prices increase. They seem to take those two out and for what reason I have no idea.

 

Because those commodoties are affected by many things besides the dollar. NOt to say the dollar wont affect prices, but it's not a static relationship.

 

Most commodities are traded in dollars so any fluctuation in the dollar drastically affects commodity prices. There may be other stuff, namely supply and demand, but the dollar connection has a huge impact on oil prices at least. Back when oil shot up a couple of years ago people didn't want to see the relationship between the dollar and oil as the in thing was to blame oil corps, but I think maybe now folks will see the connection.

 

Quantitative easing does not have a static replationship with the value of the dollar, nor does the value of the dollar have a static relationship with the prices of commodities, but they do have a significant relationship.

Fed is trying to reduce the appeal of very low yielding, low risk investments and increase the appeal of higher risk, higher yielding investments.

If 600 billion doesn't kill deflation / trigger inflation, mark my words, we'll print 6 trillion.

 

Don't get that part. Treasuries are low yielding instruments. I think folks bought up a bunch that actually had a negative yield a week or two ago. Again, not saying you are wrong, I just don't quite get that part.

 

HIgher risk investments could be employees, business infrastructure, equities, real estate, etc. All are better than cash hoarding, which is what is going on.

 

Well, QE2 can't do that alone. Businesses are hoarding a shit load of cash due to low consumer demand and uncertain govt legislative landmines, etc.

I guess if the dollar weakens then exports will be cheaper and thus folks overseas will buy more American stuff and thus, in theory, created jobs for Americans. Of course what I find ironic is that demand for new American products will probably be fullfilled by factories in Asia.

 

The primary goal of QE2 is to persuade the hoarders to take risks. It is the opinion of some that it won't work, but that's the primary goal. Additionally, fighting deflation and creating up to 4% inflation will boost equities, aid housing, and cheapen exports.