"reverse Operation" Can Do To Reverse The U.s. Economic Downturn

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U.S. Federal Reserve meeting on interest rates in September will be held on 20 and 21. August meeting on interest rates, the Fed for the first time a clear continuation of ultra-loose monetary policy point of time, commitment to zero to 0.25 percent federal funds rate to maintain at least mid-2013. In this measure, the face of U.S. economic decline, the Fed's monetary policy "toolbox" in the remainder of the "magic" has been much, but no doubt is the inevitable introduction of liberal policies, is that QE or "variants" difference only.
After the first two rounds of quantitative easing monetary policy, the U.S. economy still not out of the doldrums of the quagmire. Second-quarter GDP estimate the value of the second annual rate of 1%, lower than the first estimate value of 0.3 percentage points, representing a 1.9% increase in quarterly decline of personal consumption expenditure increased at an annual rate of 0.4%, an increase of the past the lowest in more than a year, in August the unemployment rate in the U.S. non-farm sector by 9.1%, while non-farm employment growth ring nil, expected U.S. economic growth will remain ...
... below market expectations, endogenous economic growth momentum is weakening. In this case, the Fed must take further measures, creating a favorable environment for economic growth, short-term interest rates have been reduced to a minimum, can operate only long-term interest rates, but their policy choices are numbered.
Now look, kind of like QE1 and QE2 QE3 purchase securities directly to large-scale launch is unlikely. U.S. August CPI rose 3.8%, chain 0.4%, core CPI rose 2%, chain 0.2%, the highest since November 2008, the largest increase. Core inflation has been close to the Federal Reserve under the 1.5 to 2% limit, if inflation exceeds this limit, the Fed should tighten monetary policy. QE3 If you continue to introduce, will push up global inflation and U.S. inflation risks, which will further squeeze the consumer, is not conducive to U.S. economic recovery. The rise in inflation, the inflation hawks inside the Fed will lead to dissatisfaction, some members of Congress sentiment will rise against the Fed.
More importantly, QE3 will be a heavy blow to money-market funds, the U.S. repo market trouble. Repo market has been short-term financing for U.S. companies and money market funds to invest in major markets through QE1 and QE2 on the U.S. national debt and MBS securities of a large number of acquisitions, this market has very few qualified collateral. A direct result of reduced collateral repo rate continued to fall, from September last year fell to about 0.24% in August this year, about 0.07%, which to some money market funds has caused tremendous damage to them or to seek higher-yielding investments, or would rather bear the loss of some of the capital held in cash, is not willing to put money into riskier assets, which will be stuck as a major banking and corporate short-term financing, a credit and investment decline, contributing to the risk of recession. If the Fed continues to launch QE3, repo market may collapse.
The general view, the Fed is likely to hold 1.65 trillion in U.S. treasury bonds portfolio to "reverse operation", that does not expand the size of the balance sheet, but to extend the duration of its bond holdings. If the average maturity was extended from 6 to 15 years, equivalent to fixed-rate mortgages down 5-10 basis points. This method can not only get the benefits of quantitative easing, but also can avoid the risk of balance sheet expansion, the Fed hawks and doves within the agreement between the easy choice. The United States has in the 1960s under the Bretton Woods system, the method used to save the U.S. dollar, but the move was considered a failure. If the Fed tried again, and Bernanke is still hopeful that this operation was not unrelated to, he always thought that if the last "reverse" the scale is large enough, the result will be the opposite, firmly believe that the balance sheet intervention will achieve positive results. So, this "reverse action" to reverse the U.S. economic decline it?
"Reverse operation" means all the main semi-reverse and reverse, the main purpose of long-term bond yields are low, so that the yield curve becomes flat, spread to change the current situation of more than 170 basis points. Half-turn short-term treasury bonds, mainly through selling, buying long-term bonds, this is the most relaxed way, is now generally considered the most likely to approach; all reverse is the active short-term bonds and selling longer-term bonds, to extend the loan maturity , forcing investors to take on more risk, this approach is clearly more radical in the current fragile situation of the market is unlikely to be implemented.
Semi-reverse operation if implemented, will be short-term bond yields rise, to bring some short-term upward pressure on interest rates, but the Fed has made a commitment to maintain low interest rates, this part of the pressure can be absorbed by the market, will not cause global U.S. dollar supply, affect the international balance of payments. In addition, the synergistic implementation of the five times before the end of the central bank dollar liquidity tender operation, though mainly U.S. dollar liquidity into the banking sector in Europe, but also to a certain extent, the "reverse operation" may cause tensions to prevent supply of dollars. However, the Fed must pay attention to "reverse operation" of the implementation details, to sell short-term government bonds may lead to other investors to cash out of the market, the short end of the yield curve will fluctuate too much, if not flexible control, a lot of money suddenly out of the bond market, the entire income curve will be on the move, which will cause the U.S. economy a heavy blow. Therefore, "reverse operation" is a very high-tech act, requires close cooperation with the Federal Reserve and the Treasury. The Fed's "reverse operation" will make short-term depreciation of the dollar to lose footing, but to achieve long-term debt monetization, this will lead to further dollar weakness. In summary, the "reverse operation" has become a high probability event, it seems a significant effect.
Federal Reserve policy by trying to suppress a variety of short-term rates and long-term interest rates, intended to encourage investment and consumption to spur economic growth. However, enterprises, banks and residents as far as the financial crisis caused by the balance sheet recession, which is still in the balance sheet repair stage, residents are busy reducing leverage, companies are busy hoarding money, while banks credit crunch to avoid more bad assets. Whether QE1, QE2, or "reverse operation", will focus on the policy the money supply side, focusing on the massive injection of liquidity to the market, there is no demand for money in the case, this result can only be a "liquidity trap. " It can be said, save the current U.S. recession, monetary policy is not to create a number of money supply, but rather how to stimulate the demand for money.
In the face of difficulties, I believe that fiscal policy should play a leading role in economic growth, weak monetary policy can not immediately solve, any monetary policy should have a real impact on economic activity, at least three to six months time. There is no QE3 or "reverse operation" may not have much difference. On the contrary, if a little loose about the financial waistband, might make a significant contribution.people really feel comfortable as well as fashionable even though they’re putting upon true religion mens.They’ve in no way already been specific for those who fit in with a specific occupation.If your client earns a set of true religion jeans protected within unsightly stains as well as openings, we’ll need to spread all of them because of an excessive amount of put on.Completely, true religion mens straight leg jeans offers much more compared to nine hundred shops, merchants as well as impartial true religion outlet retailers all over the planet.