Evans Calls for Further Fed Stimulus to Reduce U.S. Unemployment to 7.5%

DA60 · Sep 7, 2011

'Federal Reserve Bank of Chicago President Charles Evans said the central bank should move aggressively to reduce unemployment, even at the cost of temporarily pushing inflation higher.
The Feds current commitment to record-low interest rates should be made contingent on pushing the unemployment rate to around 7 percent or 7.5 percent, as long as inflation stays below 3 percent in the medium term, the 53-year-old regional bank chief said today in a speech in London.
Given how truly badly we are doing in meeting our employment mandate, I argue that the Fed should seriously consider actions that would add very significant amounts of policy accommodation, he said. Such further policy accommodation does increase the risk that inflation could rise temporarily above our long-term goal of 2 percent.'

http://mobile.bloomberg.com/news/20...to-reduce-u-s-unemployment-to-7-5-?category=/

DA60 · Sep 7, 2011

Hello!!!

You macro-economic ignoramus...the CPI inflation rate (which is a joke as it is, IMO) is already 3.6% and has been for months.

And now you want to push it higher to reduce unemployment some...even though the already trillions you and your fellow (mostly) economic dumb dumb's have spent so far has - AT BEST - reduced unemployment only slightly and only temporarily?

Trade your dollars in for food commodities and precious metals people - because the FED is taking the U.S. greenback on an inflationary ride to hell.

Either these people are monumentally ignorant or they are monumentally corrupt or both.

waltky · Sep 18, 2011

As joblessness soars, so do the unemployment hawks...

The Fed's unemployment hawks
September 17, 2011: Forget about inflation hawks. It's the unemployment hawks who are quietly winning the debate at the Federal Reserve.

The Fed's dual mandate to promote both maximum employment and price stability creates a natural conflict as policymakers debate the best action to stabilize the economy. But rarely in the central bank's history has that debate been so pronounced. Three district bank presidents are vocal in their worries that the Fed will cause inflation by buying up Treasuries and pumping hundreds of billions into the economy. They are one reason the central bank has avoided definitive action at the last few meetings. And with the latest Consumer Price Index showing the highest level of inflation in three years, inflation hawks are sure to start squawking again. But they're likely to be overruled when the Fed meets next week. As the job market remains flat, and the economy continues to slow, the central bank is expected to announce some kind of additional steps to address the slowing U.S. economy and stubbornly high unemployment rate.

The most vocal unemployment hawk has been Chicago Fed President Charles Evans, who said in a speech earlier this month that persistently high unemployment needs to be the central bank's focus right now. He said that if inflation was several percentage points above the desired level the way unemployment has been for the last few years, Fed members "would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market." And he's not the only one voicing support for more action.

San Francisco Fed President John Williams essentially dismissed the risk of inflation in a recent speech and argued the Fed's attention needs to be focused instead on jobs and weak growth. Though Williams is currently an alternate member of the Federal Open Market Committee, he will join the rate-setting panel next year. "The real threat is an economy that is at risk of stalling and the prospect of many years of very high unemployment, with potentially long-run negative consequences," he said. "There are a number of potential steps the Fed could take to ease financial conditions further and move us closer to our mandated goals of maximum employment and price stability." Among those steps is a third round of Treasury purchases, known as quantitative easing, or QE3, although most economists think the Fed will stop short of adding to an already bloated balance sheet.

But shifting the Fed's Treasury holdings from shorter-term to longer-term bonds, a policy known as "Operation Twist" is likely, according many economists, as is eliminating the interest paid to banks on their excess reserves. Fed watchers say one of the things that will help unemployment hawks tip the scales is that they are backed by Fed Chairman Ben Bernanke, Vice Chairman Janet Yellen and New York Fed President William Dudley. "Those three are ready to act, and they're able to take along the others in the center of the debate," said Paul Ashworth, chief U.S. economist for Capital Economics.

The problem for the unemployment hawks is it's not clear whether the steps they have available will have much impact on hiring. "We have to be realistic. Short-term rates are at zero and long-term rates are at 60-year lows. We've got mortgage rates at record lows," said Bernard Baumohl of the Economic Outlook Group, a Princeton, N.J., research firm. "If that cheap credit is unable to stimulate growth, there is nothing more the Fed can do." Ashworth says that's one reason the unemployment hawks aren't getting more attention -- no one really believes the steps they're advocating can make much of a difference. "A modest drop in rates might help at margin, but it's not like long-term rates are high to start with," he said. "Basically there's not much they can do right now."

Source
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waltky · Sep 21, 2011

QE3 with a Twist...

Stocks plunge after Fed disappoints
September 21, 2011: Investors aren't digging the Twist. Stocks plunged after the Federal Reserve made it official -- no change in rates and Operation Twist is a go.

Stocks ended near the lowest levels of the day after the Fed said it will shift $400 billion from short-term Treasuries into long-term Treasuries in an effort to boost lending and spur the economy. While Operation Twist was exactly what investors had been anticipating, meeting expectations with the bare minimum came up short of pleasing them. The Dow Jones industrial average (INDU) dropped 284 points, or 2.5%, with all but one of the blue-chip index's 30 components closing in the red. Hewlett-Packard (HPQ, Fortune 500) was the only Dow component that traded higher, spiking almost 7% amid rumors that HP's board is considering a shakeup that would include replacing current CEO Leo Apotheker.

The S&P 500 (SPX) fell 35 points, or nearly 3%. Even the tech-heavy Nasdaq composite (COMP), which had been trading higher most of the day, closed down with a drop of 52 points, or 2%. "Operation Twist was priced into the market, and investors needed a twist on the twist -- something more," said Doug Roberts chief investment strategist for Channel Capital Research. While the Fed said it will also reinvest the proceeds from maturing mortgage-backed securities into more mortgage-backed securities, Roberts said that additional step is still lacking. What would help satisfy financial markets is if the Fed were to bite the bullet and pump more money into the economy with another round of Treasury buying, or QE3, he added.

But experts said the Fed, which is running out of policy tools, will probably hold back from expanding its balance sheet unless investors and consumers grow warier. "By not mentioning QE3, it definitely appears that the central bank is saving their few remaining bullets in case the volatility in financial markets intensified or the U.S. economy falls into recession," said Kathy Lien, director of currency research at Global Forex Trading. Mounting concerns about the economy kept pressure on transportation stocks Wednesday, as investors feared that truckers and shippers may suffer a slowdown in business along with the slowing economy.

The Dow Jones Transportation Average (DJT), a collection of 20 truckers, shippers, railroads and airlines, tumbled 5.3%, with railroad giants GATX, CSX Corp. and Norfolk Southern leading the decline. Meanwhile, investors quickly moved into U.S. Treasuries, sending the 10-year Treasury yield to a fresh record low around 1.858%. Aside from the Fed, investors remained on edge over the developing situation in debt-stricken Greece. Evangelos Venizelos, the Greek finance minister, told Parliament that more budget cuts would be needed in order for the country to get back on track.

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See also:

Operation Twist: Investors want the unexpected
September 21, 2011: Investors may be expecting Operation Twist, but what they really want: a surprise grand gesture to woo them back into stock market.

For weeks now, investors have been anticipating that the Federal Reserve will announce Operation Twist -- a plan to sell short-term notes and buy long-term Treasuries -- at the close of its two-day meeting Wednesday afternoon. Twist refers to the attempt to twist down long-term rates, and get some lending going. But with the U.S. economy sill struggling, investors are hoping for the unexpected. And talk has turned to the possibility of another round of quantitative easing, a bond-buying program that the Fed has already used twice (QE and QE2) in an effort to spur lending. "The market right now appears to be anticipating a move so investors will buy the rumor sell the fact," said Thomas Sowanick, chief investment officer at Omnivest Group.

That means, if the Fed announces more than Twist, investors will race into the stock market. If the Fed just announces Twist, investors will walk out the door and at least remain wary of risk-taking. Should the Fed do nothing or something seen as having even less of an impact, such as lowering the overnight rate paid by banks to deposit money at the Federal Reserve, the market could be in for a sharp sell-off before Wednesday's close. "My concern is that the Fed has done all they can do at this point," said Joseph Tanious, market strategist at J.P. Morgan Funds. "What's Twist really going to do for the markets and economy?" Indeed, one problem with formally announcing Twist: it quickly exposes the impotence of monetary policy in a global economy that's in turmoil.

Interest rates on benchmark 10-year Treasuries hit an all-time low of 1.87% last week, and have barely budged over 2% for the entire month. That's worse than the height of the financial crisis, when the 10-year yield hit a low of 2.08% in December 2008. Ahead of the two-day meeting, Fed Chairman Ben Bernanke has been aggressive about putting the ball in Congress' court during public speeches. Still, even if it's not much, investors want assurances that the Federal Reserve will do something. "Fed can't be seen to do nothing," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. Twist -- the middle ground of monetary policy -- will be the likely outcome.

The Federal Reserve is also expected to outline what types of bonds it will purchase. Investors aren't entirely sure whether the Federal Reserve will buy 10-year or 30-year Treasuries or a mix of both. Bond prices have moved down on 10- and 30-year Treasuries. So if the Federal Reserve concentrates its buying in say 10-year Treasuries, bond prices on those notes would move up and yields would move down. 30-year Treasuries would move in the opposite direction, with yields rising on the longer-term bonds. While it may not be politically palatable, market observers still see another round of quantitative easing as a possibility either now or in the future if the economy remains stalled. "You can't take QE3 off the table," said Clemons.

Source
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fmw · Sep 25, 2011

DA60 said: ↑

Either these people are monumentally ignorant or they are monumentally corrupt or both.
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Monumentally corrupt, like the rest of government.

Clint Torres · Sep 26, 2011

I like the concept of stimulis money, it comes from a lot of taxpayers and it goes to a few banks. like a funnel, where you can go to for some of it. It beats trying to locate all that tax money drifiting out there in cyber world.

When the stimulis money gets to the States, they will spend it to grow, and create bigger debt. And guess what? it will all come back to the investment world. That's right, we can profit off the debt of each US State. Municiples and loans at BBB+ interest ratings. thats about 7% to 9% returns on investments. And the best part it is all consolidated, organized and ready to take. Stimulis money is good money. Not so mouch for the taxpayer and the government, but for the investor and the investment industry.

Keep hope alive. Keep hope alive.

unrealist42 · Oct 2, 2011

The trillions spent on trying to stimulate the economy through tax breaks and giving banks free money has been a huge waste of time and money.

The Fed should just send everyone a check for $5,000 if they really want to kick start the economy. All that other crap has done nothing for demand, which is the real problem.

bacardi · Oct 3, 2011

unrealist42 said: ↑

The trillions spent on trying to stimulate the economy through tax breaks and giving banks free money has been a huge waste of time and money.

The Fed should just send everyone a check for $5,000 if they really want to kick start the economy. All that other crap has done nothing for demand, which is the real problem.
Click to expand...

actually, the "REAL" problem is savings and production.....not consumption!

unrealist42 · Oct 4, 2011

bacardi said: ↑

actually, the "REAL" problem is savings and production.....not consumption!
Click to expand...

That discussion is in full swing over here:

http://www.politicalforum.com/political-opinions-beliefs/209434-consumption-vs-production.html

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Evans Calls for Further Fed Stimulus to Reduce U.S. Unemployment to 7.5%

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