QE3

Mike Bertelsen

The announcement was earlier today. QE3 is here, $40 billion of bond buying by the Fed. That's a month, $480 billion a year, and it's open-ended. Unemployment is the concern for the Fed move. Reaction was a boost in the DJIA and stronger gold and a weaker dollar.

Three concerns have been raised, long-term securities buying, inflation, and low interest rates. Healthy investment returns are tough to get in a tough economy.

On August 11 I wrote that QE3 would happen by the end of September. The Fed felt that they had to act. Whether or not a massage was sent to Capital Hill is another item, but I get the feeling that Congress won't act so close to election day.

The open-ended approach raised an eyebrow with analysts. As long as the Fed will keep bond buying, will the unemployment number decrease? Probably not. Ben Bernanke has said the Fed does not have the tools to help employment. He is looking at economic evolution. Impact on the labor market depends if the economy moves with the easing.

Two primary tools are balance sheet adjustments and communications to see the process through. Will this help Main Street? Wall Street will be helped. Mr. Bernanke said this is a Main Street program. One item he brought up is the housing market. The result from the easing is for mortgage interest rates to remain low. Bernanke wants an economy that has growth. The Fed
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