Tuesday, August 10, 2010

Phil Flynn: If At First You Don't Succeed, Try, Try Again!

If at first you don't succeed, try, try again! It’s Fed Day and the global energy markets are waiting to find out whether or not the Fed is going to boost the markets with another shot of quantitative easing. Speculation is swirling that the Fed, desperate to knock the malaise out of the economy, will double down on its policy and flood the economy with even more printed money. This is a far cry from expectations just a few weeks ago when the Fed was widely expected to reduce their balance sheet as they were set to collect 100 to 180 billion dollars in profit from its Mortgage Backed Securities (MBS) it took over in the heat of the financial crisis.

Instead of putting that money back in their coffers and reducing the money supply, the fearful Fed may just pump that cash back out there and buy more MBS or bonds to try to inspire some economic activity and maybe even some job creation. In fact data out of China overnight might even put more pressure on the Fed to act. Chinese imports came in much weaker than expected in July causing a big selloff in the Shanghai composite index. The index dropped 2.9% which was its worst percentage.....Read the entire article.

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