Joseph Tr: All QE, all the Time

Date of issue: 10 November 2010. Speaker: Joseph Tr. Can the Federal Reserve create robust economic growth and with it jobs? No. Not if the fiscal and policy environment is not conducive to business confidence and expansion and the American consumer is more focused on balance sheet repair than consumption and deploying leverage. Can the Fed underpin a weak American economic recovery and prevent it from a second collapse? Probably, as long as there are no dangerous economic or political developments elsewhere. Is quantitative easing (QE) the only tool left in the FOMC kit? Yes. Short of paying folks to borrow money, which already exists for banks in the overnight funds market, interest rate policy is at its practical limit. Is the easing policy of the Fed worth the dollar devaluation risk? Or is that devaluation part of the Fed plan, though it cannot admit as much.