In what I believe is the 1st time a Fed member has quantified the size of potentially more QE, the ultra dove Evans says it could be $600b, in what would likely be in the MBS space, in a Q&A after a speech. Evans dissented in the past few FOMC meetings in 2011 in that he wanted more QE. He however doesn’t vote in 2012 but there will still be plenty of doves on the committee to follow thru. As I wrote earlier today, further artificially suppressing the level of interest rates is not the solution to a deleveraging cycle, time and debt paydown/writedown is. However, central bankers and politicians don’t have the luxury of time and thus patience and it’s why QE will continue to be their preferred answer. At some point they’ll realize it doesn’t work but how much damage will have already been done to the value of paper currencies and resultant inflation before they do?

Category: MacroNotes

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4 Responses to “If more QE, Evans says $600b”

  1. super_trooper says:

    “At some point they’ll realize it doesn’t work ”
    Easy to say
    Prove to me that it won’t work.

  2. Concerned Neighbour says:

    If (when?) they begin another round of QE with oil at $100, they’ll plunge the country right back into recession if it isn’t already headed there. But equities will probably go gangbusters, which is the primary goal of QE anyways.

  3. gusgus says:

    What do you mean “it doesn’t work”? Of course it works. Beyond just supporting equity and commodity prices, QE stabilizes the banking system and reduces interest rate spreads. Both rounds of QE coincided with pickups in economic activity across the broad economy. There’s little doubt that QE has beneficial effects across the economy.

    The question is not whether quantitative easing works, the question is whether it is worth the cost.

  4. Free Market Extreemist says:

    Devaluing Currency = Reducing Value of Outstanding Debt = Winning