The Market May Be Saying the Fed Will Move Next Week

July 25, 2012

It looks like the Fed may be ready to move next week (meeting is July 31-August 1) on a new Quantitative Easing Program or QE3 (translation: money printing.) Jon Hilsenrath of the Wall Street Journal mentioned that the Fed may or may not move at their next meeting as the economy has continued to weaken. This "leak" helped move the market up (but still closed down) in the last half-hour yesterday. Today, comments by Steven Roach and others indicate that the Fed will move at the August 1 meeting.


I have been predicting that the Fed would inject more money into the system for some time. It is the only thing they know how to do and they can't escape their Keynesian thought model. However, I thought they would have acted sooner because we haven't solved the problems that created this recession and both parties want to get re-elected.

I don't know if the Fed will move next week or not. But, what you expect the market to do on learning of QE3; it is doing. From this mornings low, equities have rallied to over 100 points, the dollar is down (printing debases the dollar) and gold is up big (reduced buying power and fear of inflation.)

Will this help? Depending on size and pace of printing, etc., it could levitate the market for a short period of time (weeks to months.) But in the long term, it will not work and in fact make our problem of de-leveraging worse (more painful)