ShawnW: Why would QE3 matter to us?
I have been watching the forums and chat and also had several people ask me this, so I thought I would post my opinion. This may ramble a bit as I have a couple of reasons why QE3 may be important.
So we will start by going back to the root of QE or Quantative Easing. The common definition is creating money out of thin air and injecting it into the economy to give it a jump start, similar to someone having a heart attack and when they heart stops they bring over the defibrillators to shock it back to life. They bring a box over that creates energy outside of the current system and inject that energy to the affected spot in hopes of shocking it back to life. In our situation they are using money to create that shock in our economy that is having a cardiac arrest.
Now so far they have given us the juice 2X to no avail, while it has made us jump and tingle for a bit there has been no lasting affect and we go back to a flat line economy. But still the Fed stands by the fact that QE will help our system....
So this now brings us to our scenario.
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When this RV happens many if not most will quit their jobs, opening positions for many that are currently unemployed. Most will go buy new houses, cars, vacations, so on and so on... money will be put into the system at an unprecedented rate. At least on the short term. When this happens in the few months post RV there will be noticeable differences.
So why not announce QE3 at this time, rolling that out at this time will "show" that the FED and Gov are in control of this economy still and are taking the steps to make it better. and what they are doing is actually working... at least in the public eye. That is a big reason for this global stimulus that keeps getting thrown around. IMO
Would be interested to hear others opinions as well on this. I have another theory of why this may be not only wanted but needed to roll out at the same time, but I am not smart enough to put it in writing yet... lol
(TuscanyGirl) Shawn I was thinking the same thing, RVing would sure give the US a shot in the arm, just as QE3 would, maybe doing this at the same time would divert eyes from the public away from the RV event, and everyone would think that the QE3 was working.
(Boomer6966:) To my mind, the most telling thing about this is that almost every economist I've seen within the past two weeks has said they fully expect Bernanke to announce QE3. In the immediate build up to this Jackson Hole Summit and even building up to today, they were all saying he would announce QE3 and/or a change in fiscal policy.
So, in spite of all convectional wisdom what does he do?... Nothing.
Now, playing "devil's advocate", maybe leaving things alone is the way to fix things. Too much meddling may make things worse. I don't know, I'm not an economist.
But, BUT, what I am is a citizen. One would think that to restore or improve consumer confidence, he would do something. Even if it was mostly lip service, it would at least appear that the Fed was doing its best to resolve this global financial crisis.
And yet, other than continuing low interest rates, Bernanke did nothing. Why?
I don't know, but like you all, I'm hoping he won't need to do anything.