Should you ignore this? I would advise that you not be an ostrich! First, I would say that Investors are nervous Nellies! Any News shakes the markets, and bad News reminds of a woman reaching menopause. Erratic behavior is to be expected. The sheer existence of an Election means an alteration potential in leadership. Candidates can easily worsen the situation with Talk about Change, a circumstance certain to shake the confidence of any Investor; who made his investment decisions based upon a static Reality. Here is the humor of the situation: the nervous state of the Investment world practically ensures there will be no real Change in policy; a least, any Change which will have a measurable, adverse impact. This factor, though, does not lessen the extreme possibility that it will lead to another Recession; remember I mentioned that Investors were subject to Hot Flashes!
Here is a man who is wrong, but would not admit even if he believed it; it simply confounding his basic economic mores. Brad knows that Government investiture in private securities will alter the nature of Pricing of these securities, and that Investors will forever demand Government action to secure such investments every time there is a threat to their maintenance. Brad, though, believes the economy needs more Cash, and here is an easy manner to obtain it through Fed purchase of private securities. The economy first does not need the added Cash, and would not employ it in economic production if it is received. We cannot involve the Fed in private securities without Investors demanding a continuous Price Support for these Securities, utterly destroying the limited Pricing mechanism which discourages excessive Debt collection, while it encourages artificially low Interest rates which will not pay for the Debt aggregation or capital renewal. We should not attempt to stop a forest fire by starting a backfire in a downtown shopping mall. This is saying that down the road injuries should be avoided in immediate Aid practice–for Those of Us resembling myself.
You can find the basic positions of members of the FOMC to the question of QE2. I will go immediately on Record and say I vote NO! Of course, this means absolutely nothing, as they would not let me on the FOMC even if I promised to throw in the money for QE2. There is absolutely no indication that such reckless financing will even induce any added Investment in the economy. It is exactly like Tax Cuts; giving a Profit to Business personnel who cannot make a Profit by simply managing their businesses. I would suggest a simple alternate Rule to replace a ridiculous increase in the Money Supply. This simply to state that Banks cannot keep their FDIC insurance, unless and until 40% of their loans and 30% of their funds go to small and intermediate business investments. Much simpler, and lacking all the great Threats existent to financial stability. It might seem harsh, but I think even the bankers would approve of this Ruling. lgl