Suggestive Selling of Quantitative Easing
CNNMoney is working overtime convincing the American public that Wall Street investors are cheering on the Federal Reserve and the ECB to unleash another Quantitative Easing program in the face of another contrived liquidity crunch and market falloff. The ideas put forth in the mainstream press is one of Quantitative Easing or collapse ahead. It’s one or the other, and the timeline is getting shorter as individuals like George Soros and economists are saying that the Federal Reserve and the European Central Bank must commit within a timeframe of now-three months in order for stimulus to keep this boat from sinking in the short term.
Against this gloomy backdrop, investors will be looking for signs that central bankers in Europe and the United States will take steps to support the economy.
The European Central Bank will hold its monthly policy meeting in Frankfurt on Wednesday. And Federal Reserve chairman Ben Bernanke will testify before Congress Thursday about the outlook for the U.S. economy.
“It’s all about the Fed,” said Keith Springer, president of Springer Financial Advisors in Sacramento Calif. “If the Fed comes through with a QE program, that could save the market — if not the market will fall off a cliff.”
The Fed is under intense pressure from investors to announce another round of stimulus, following Friday’s dismal jobs report.
The storyline is simple: Without Quantitative Easing the markets will collapse.
The push by the mainstream media for the U.S. central bank to buy trillions more worth of Treasury debt through Quantitative Easing also includes U.S. bonds part-in-parcel of the program Operation Twist, which is due to expire later this month.
On Thursday, ECB president Mario Draghi will address reporters on the banking crisis in Spain. He will also field questions that same day on the Spanish government’s selling of 2-year, 3-year and 10-year bonds.
Billionaire investor George Soros warned Saturday that European policymakers have a three-month window to correct past mistakes and take bold action to stabilize the euro currency union.
Speaking in Italy, Soros said he expects Greek voters to back the pro-bailout New Democracy political party in this month’s election.
But he added that no government in Athens will be able to impose the deeply unpopular austerity reforms that are a condition of the international aid Greece needs to avoid a default.
“The Greek crisis is liable to come to a climax in the fall,” said Soros.
Still, Soros said the euro will probably be saved since European leaders, particularly German Chancellor Angela Merkel, have so much to lose.
“The likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany,” said Soros.