Copyright © 2013 The Wall Street Challenger. All rights reserved.
Any opinions, views, news, research, analyses, prices or other information contained on this website is provided as general market commentary and are not intended to constitute investment advice. The Wall Street Challenger will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
Comprehensive independent analysis of the financial and global markets news
With the prospect of deflation, monetary policy alone without strong fiscal policy
has a marginal effect in stimulating the economy. By expanding Quantitative Easing
by doing portfolio-
Many commentators expect the appreciation of the yuan to force China to invest more in US Treasury bonds. I believe it will have the opposite effect as their past investment motives have not been fully understood. These speculations ignore the fact that China is the major foreign purchaser of U.S. Treasuries because of its exchange rate policy. The historical data shows that China’s exchange rate policy was complemented by China’s ownership of U.S. Treasury securities, more than some economists will admit.
CDOs played a notable role in the financial markets. Did the CDO cause the financial crisis or was it blindness, greed and the need for riskier assets? The constructors of the CDOs may not bear direct responsibility. Rather their reckless use, misunderstanding and ignorance of key warning signs likely contributed to the magnitude of the financial crisis. You can observe the financial landscape today and recognize from the survivors, walking wounded and the absentees those who knew and those who had not understood the use of these tools.
Distorted home price indicators can adversely affect the consumer by increasing expectations
of a stabilized housing market. If these false expectations do not become reality,
the result will be consumer fear. The S&P/Case-
Monetary policy intervention did not achieve the effects that most hoped. What merits
applause is the ingenuity of targeting an increase in "financing wages" as a means
to spur spending out of profits. More ambitious targets were beyond the firepower
of the Fed -
This paper seeks to answer two questions: i) Has QE become less effective with each additional round in stimulating job creation? and ii) With the increasing use of QE, determine if it is truly suitable as a monetary policy in the future.
The Federal Reserve dual mandate has never been more controversial since the financial crisis began in December 2007. Maximizing employment has been recently regarded as the central bank's primary mission, yet this is chasing a mirage. Each round of QE became increasingly less effective. The fact is that the advance of the economy is essentially determined by the course of prices and, respectively, profits.
With the U.S. equity market rallying to all-