Recent news items have noted the fears of several individuals that QE2 will spark rapid inflation, e.g. [1]. For instance, Representative Paul Ryan, expected to become the Chairman of the House Budget Committee in January, stated: “I think it’s going to give us a big inflation problem down the road.”
Here are what various market-based indicators suggest.
I guess now we know that the Fed has the tools to prevent deflation.
The New York Times hosts a discussion of the proposal by World Bank President Robert Zoellick for an international monetary system that uses the price of gold as a reference.
By Willem Thorbecke
Today, we’re fortunate to have Willem Thorbecke, Senior Research Fellow at Asian Development Bank Institute, and consulting fellow at Japan’s Research Institute of Economy, Trade and Industry (RIETI) as a guest contributor. The views expressed represent those of the author himself, and do not necessarily represent those of ADBI, RIETI, or any other institutions the author is affiliated with.
Things look slightly cheerier than they did a month ago. But that’s not saying much.
The Employment situation release for October surprised on the upside: the Bloomberg consensus was for 60,000 increase and the actual was 151,000. And yet I receive emails from the JEC-Republican stating:
The use of emergency rooms for routine care fell, as did hospital admissions for treating preventable conditions, and the proportion of uninsured among hospital inpatients (by 36%), while there was no increase in the growth of hospital costs. From the NBER Digest article summarizing NBER working paper 16012 [ungated version] by Jonathan T. Kolstad and Amanda E. Kowalski:
Typically, economists assume that news, defined as information that induces revisions to expectations of the future value of relevant variables, should affect asset prices simultaneously, and in a consistent manner. That’s why today’s announcement of QE2 has somewhat surprising effects, if one is to believe that QE2 had already been priced in [0].
The Federal Open Market Committee announced today that:
the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.