What I Think….Is There No Limit ?
It seems everyone, economic analysts, market players, and investors are operating on the premise that the FED will keep adding liquidity until the economy’s numbers and the employment numbers become more robust.
The problem however, is that both of these numbers need two things, neither of which come from the FED, all from Congress. The first and foremost thing is tax policy that takes and changes the inequality basis of asset and income growth that has become entrenched over the past 30 some years. The second needed thing is an approach to full employment that actually puts more people to work.
For me, my premise that “trickle down”, the current policy of the FED,that really doesn’t really work for anyone other than the really rich who floated the idea initially back in 1982, is the issue. Just look at yesterday’s New York Times and the story about skyscraper condo’s selling for $ 60 to $ 90 million dollars, apparently most of the money is staying at the top.
So is there really no limit to the FED’s actions in the short-term? Lets look at a few things that may change the direction.
1) First, we hear that the FED will find it difficult to find qualified securities by mid 2014.
2) Secondly, would it not make sense for Yellen to now have a sit down with Bernanke and push for him to start undoing the debacle that he started. Why should she take the hit after he goes back to being a Professor?
3) Thirdly, the cost to the US budget for the potential losses of the FED on its portfolio as interest rates rise has to be taken into account. It is not unimagineable that we could potentially see losses of 25 % of the current face value of the portfolio, $ 4 trillion dollars of funny money.