“I am sure that Bernanke will give the green light to new stimuli. Otherwise, the disappointment of the markets risks being really dangerous. But the Fed does not necessarily choose the path of Qe 3. There are alternatives”. Claudia Segre, general secretary of Assiom, sides with the interventionist party.
Yet the opinion of the experts this time is divided. Will Ben Bernanke give an encore? Or, this time, will he abstain from concrete measures? Anticipation for the Fed Chairman's speech this afternoon in Jackson Hole, Wyoming, is growing by the hour. Perhaps more than a year ago, when "helicopter Ben" announced, in front of the central bankers' audience, the launch of the stimulus package called Qe2: 600 billion dollars that served as a lifesaver for stocks and bonds, until last June. But now?
As "hour X" approaches, the ranks of skeptics grow stronger and point out that this time the situation is different than 12 months ago: then inflation was 1,2%, today it is at 3,6 .10%; then the Fed sided with the president, today three out of XNUMX members voted against the president's choices; Back then, finally, there was talk of deflation, today there are signs of recovery.
This time, in the words of Kenneth Rogoff, "it's really different". Or not?
In Rogoff's words, it looks different. But it's not. The danger of inflation, in my opinion, is really remote. Recovery is far away. The real estate market crisis remains very serious, the ambitious targets that Bernanke had set for himself in terms of employment are light years away, above all if one considers that the economic improvements are in reality due only to the fact that many unemployment benefits have expired.
Hence the forced choice of new stimuli?
It would be very dangerous to disappoint market expectations. Unfortunately, both in Europe and in America, politics proves powerless to take effective measures. So all that remains is to turn to the monetary authorities, the only ones who can give credible answers.
But at a high price. Can the Fed still afford a 3-600 billion Qe 700?
There are alternatives. The central bank could announce purchases focused on the extra-long end of the curve, from 15-year bonds up to XNUMX-year T bonds.
With what goal?
Targeted purchases on the secondary market in that range would flatten the curve with benefits on rates. Not only. The deal has a very good chance of success: pension fund money managers and other investors who are the natural buyers of these instruments would be keen to take advantage of the curve downturn by selling their portfolio securities to the Fed. And, thanks to the capital gains, they will favor the absorption of new issues, among other things with the result of lengthening the duration of the debt. Finally, the financial effort would be much more limited.
Waiting for political interventions.
The situation seems frozen to me, if not worse. Just read the threatening statements of Perry, the Republican candidate for the White House: any decision by Bernanke in the electoral era must be judged as a betrayal. It is the confirmation that the electoral campaign has begun and that the right subordinates the economy, which cannot wait, to the political battle.
But the situation seems to be improving. All in all, US banks are faring better than European ones. Real?
Real. They made a ton of money shorting European bank stocks. Then, when it's time to go back, they publish very negative reports on Italian banks.
