Tag Archives: Federal Reserve

The Fed, QE2 and Interest Rates

The Federal Reserve launched an ambitious bond-buying program to help the economy create jobs and growth.

The program, called Quantitative Easing 2 (QE2), is slated to end next month.

Now that the end is near and another round of Fed market intervention (QE3) seems likely, it is time to ask the question: who benefited?

Savers? No.

The unemployed? Just marginally.

Investors in stocks, gold, oil and other commodities? Yes.

An article on CBS MarketWatch did a good job laying out the real result of the program.

 

The truth? QE2 has created a massive new bubble in dollar-based financial assets, from stocks to gold. Meanwhile, it has had zero visible effect on the real economy.

Take jobs. According to the U.S. Labor Department, since last August the number of full-time workers has gone up by just 700,000, from 111.8 million to 112.5 million.

At a cost of $600 billion, that’s $850,000 a job

 

Sure, there is a little bit of Monday-morning quarterbacking going on here considering the U.S. economy was teetering on recession when the program was launched. But those facts are hard to ignore. Similar to how TARP dollars went to shore-up bank balance sheets (instead of increasing consumer loans), there appears to be a bait-and-switch with the Fed bond-buying program. Savvy investors (and probably hedge funds) made out like bandits, while the economically-depressed are stuck in neutral.

Read the rest of the Marketwatch article at http://www.marketwatch.com/story/qe2-was-a-bust-2011-05-21

Futures Pointing to Interest Rate Breakout

Everybody knows interest rates will move higher, but when?

 

Inflation could push long rates higher as soon as this spring and summer. But Bernanke and the new FOMC won’t tip their hand on short-term rates. Fortunately, we can look at the Fed Funds futures to see what the smart money is saying:

 

Implied Yield on 30-day Fed Funds futures contract

 

July 2011: 0.18%

 

January 2012: 0.42%

 

July 2012: 0.97%

 

January 2013: 1.67%

 

 

Best guess right now on the first Fed interest rate hike is the January 2012 meeting.

 

More of my interest rate analysis at bestcashcow.com, savingsaccounts.com and greenbankreport.com.


 

 

 

Treasury Yields are Pushing Higher

Don’t look now, but Treasury yields set to break out of trading range. Factors include breakdown of QE3, GDP numbers, consumer spending, China currency issues & more.  Interest rates from 2-years to 30-years could move higher on deposits, loans and mortgages.

 

More via @MarketWatch

 

http://www.marketwatch.com/story/two-year-yields-rise-by-most-in-a-month-2011…

 

 

 

 

Published financial articles: Federal Reserve Update @MoneyRates & Are You Investing in China @MoneyBlueBook

New article on MoneyRates.com

 

Federal Reserve Update – Will the Fed’s push to keep short-term interest low work?

 

New article on MoneyBlueBook.com

 

Are You Investing in China? – What are the easiest ways for individual investors to invest in China?