Bernanke followed thru with his Jackson Hole speech and didn’t pull the football away from Charlie Brown. More QE he brings totaling $40b per month in MBS with no specific timetable on when it will end, thus considering it ‘open ended.’ The Fed also extended its desire to keep the fed funds rate “exceptionally low” thru mid 2015 from “at least thru late 2014.” The Fed “is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook.” Bottom line, Bernanke gave us what many should have expected after his Jackson Hole speech where he defended previous QE and gave his ‘grave’ concerns with the labor market comment. This policy will do nothing for economic growth, raise commodity prices, will further clog their balance sheet with longer term securities and will make the process of an eventual and inevitable exit highly disruptive and messy. The Fed did little to convince me that the benefits of this new policy comes anywhere near the costs. Also, the Fed again is showing no faith in the regenerative powers of American capitalism where growth naturally happens as long as markets remain free.
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