The Market Needs To Stop Expecting More QE

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Posted: April 3, 2012 at 4:26 pm

The economy is eventually going to have to grow on its own from here without abnormal Federal Reserve methods of boosting the economy.  Today’s negative reaction from the stock market based upon the notion that the FOMC continued to signal the end of quantitative easing measures is actually rather silly.  Unfortunately, equities love easing and stimulus.  America has become addicted to more and more economic sti mulus.

Are we not entering into the age of austerity?  Has the economy not recovered handily from the recession?  What do you call a 4% mortgage rate for 30-years, even if qualifying is hard?  What do you call near-zero borrowing for consumers who purchase goods at stores who effectively finance their goods at almost zero-percent rates?  What about five-year 3% interest rate loans on a new car?  What about people who have been getting government support for more than 18 months even if they stopped bothering to look for work?

Why anyone would expect that Ben Bernanke was going to say in the FOMC Minutes today (with data 3 weeks old) that he was going to keep coming up with new stimulus and easing measures is a mystery.  The ‘operation twist’ is set to end in June, but it is still expected that some buying of securities will continue beyond that date as a limited measure of keeping rates lower.  That is still ‘accommodative policy’ by any economic measure.

The amount of economic stimulus that has been added to the economy has to come to an end eventually.  In case no one noticed, the deficits are through the roof and the tax receipts have not caught back up.  The U.S. Debt Clock shows a $15.6 TRILLION figure for all of the U.S. debt, and that boils down to more than $137,000 per U.S. taxpayer.  Eventually it becomes real money that the stimulus is used for.

If the markets want more help, they need to demand it through a better climate towards business and also towards success.  This boils down to easier tax structures, better climates to how businesses are treated, and easier rules about what happens when new hires come on board.  Punishing success is not the answer, but endless handouts are not either.  It was about ten years ago that the country started to get addicted to economic stimulus.  This needs to come to an end.

Admittedly, there are literally caveats to every single one of these statements.  Every statement here could easily come with a “but…” and “it is weaker than the past” immediately after each.  Still, it is time to stop expecting that more and more stimulus is coming from the Federal Reserve.

Eventually we all have to thrive or go into mediocrity on our own based upon our own efforts and abilities.  Let’s all move beyond expecting more stimulus… please!

JON C. OGG

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Are we not entering into the age of austerity?  Has the economy not recovered handily from the recession?  What do you call a 4% mortgage rate for 30-years, even if qualifying is hard?  What do you call near-zero borrowing for consumers who purchase goods at stores who effectively finance their goods at almost zero-percent rates?  What about five-year 3% interest rate loans on a new car?  What about people who have been getting government support for more than 18 months even if they stopped bothering to look for work?

Why anyone would expect that Ben Bernanke was going to say in the FOMC Minutes today (with data 3 weeks old) that he was going to keep coming up with new stimulus and easing measures is a mystery.  The ‘operation twist’ is set to end in June, but it is still expected that some buying of securities will continue beyond that date as a limited measure of keeping rates lower.  That is still ‘accommodative policy’ by any economic measure.

The amount of economic stimulus that has been added to the economy has to come to an end eventually.  In case no one noticed, the deficits are through the roof and the tax receipts have not caught back up.  The U.S. Debt Clock shows a $15.6 TRILLION figure for all of the U.S. debt, and that boils down to more than $137,000 per U.S. taxpayer.  Eventually it becomes real money that the stimulus is used for.

If the markets want more help, they need to demand it through a better climate towards business and also towards success.  This boils down to easier tax structures, better climates to how businesses are treated, and easier rules about what happens when new hires come on board.  Punishing success is not the answer, but endless handouts are not either.  It was about ten years ago that the country started to get addicted to economic stimulus.  This needs to come to an end.

Admittedly, there are literally caveats to every single one of these statements.  Every statement here could easily come with a “but…” and “it is weaker than the past” immediately after each.  Still, it is time to stop expecting that more and more stimulus is coming from the Federal Reserve.

Eventually we all have to thrive or go into mediocrity on our own based upon our own efforts and abilities.  Let’s all move beyond expecting more stimulus… please!

JON C. OGG

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