FOMC Statement and Quantative Easing Conundrum


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The FOMC statement came out this week. More of the same. Print baby, print. Continue to buy $40 billion per month of MBS to support housing.

I do not see how the Fed can ever unwind QE and the assets on their balance sheet. Quantative Easing stimulates GDP. Unwinding QE depresses GDP. One of the Fed’s dual mandates is encouraging employment which is difficult at best with depressed GDP.  Here are 4 articles to consider.    BC


Bank of America’s Harris Says FOMC Statement Shows No Exit Yet – By Jeanna Smialek – Bloomberg Businessweek 
Federal Reserve ponders possibility of increasing stimulus – By Ylan Q. Mui – Washington Post
The Fed’s QE Exit Will More Than Quadruple Interest Costs For The US – Submitted by Tyler Durden  – … states in the US as the Fed ‘exits’ its QE program (taper, unwind, hold) – the result, the weighted-average cost of financing for the US government will almost triple from around 1.6% to around 4.3% over the next ten years. … CBO’s rather conservative estimates … over the next decade the USD cost of financing will explode from around $205bn (based on TBAC data) to over $855bn.  … – Zero Hedge 
Foreign Holdings of US Securities Have Exploded – By: Jeff Cox – CNBC.comForeigners now hold more than $13 trillion in American securities, a record set as the U.S. seeks to assert itself as the safest port in troubled global waters. 

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