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IWETHEY Home / IWETHEY Board / Money, Financials, and Economics Forum / I think this is actually fairly big
Post #362,549
by jay
9/13/12 3:33:43 PM
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New I think this is actually fairly big
I think this is actually fairly big, in that it is happening before the election. Normally the Fed goes into holding this close to the election. They avoid doing anything of significance, to avoid getting tangled up in campaign politics or getting accused of favoring one candidate or the other.

I suspect this indicates the Fed thinks both that the economic situation is worse then the numbers suggest, and that Rommney doesn't have a chance so they don't have to worry about making him look bad in the run up.

Jay
Post #362,550
by Another Scott
9/13/12 3:47:00 PM
Reply
New It should be.
E.g. there's a good thread at Balloon-Juice: http://www.balloon-j...ernanke/#comments

60 FormerSwingVoter Says:

@ant:

so, this will help the balance sheets of banks so they can in turn issue more debt yes?


Yes. More specifically, it will remove mortgage debt specifically from the balance sheets of banks (making this quite different, IMHO, from QE1 and QE2, which were focused on long-term treasuries), reducing the risk in lending for homeownership.

Mortgage rates are going to drop to ridiculously low levels, allowing existing homeowners to refinance and get out from their debt overhang and let them build up equity. Meanwhile, those who don’t own are going to find that getting a house built may actually be cheaper than renting, given that current mortgage rates make that a close race in some areas already. Homes are built, construction workers are employed, people move in, durable goods (stoves, dishwashers, fridges) are purchased, manufacturing picks up to keep up with the demand, all while the folks who refinanced finally have a significant amount of spare cash to spend on whatever the hell they want.

This is a Good Thing.

...if it works. Given what we saw from QE2 I’m pretty damn confident, though.

September 13th, 2012 at 1:40 pm


It sounds to me like how great the impact is is going to depend, in part, on substantial implementation of the relaxed rules for refinancing. Mortgage rates have been low for a long time, but too many people couldn't qualify to refinance. But that seems to be getting easier over time.

A trouncing of the GOP in November would certainly help the process along, too.

Cheers,
Scott.
     Atrios should be happy: Ben unleashes the helicopters. - (Another Scott) - (2) - Sept. 13, 2012, 01:18:42 PM EDT
         I think this is actually fairly big - (jay) - (1) - Sept. 13, 2012, 03:33:43 PM EDT
             It should be. - (Another Scott) - Sept. 13, 2012, 03:47:00 PM EDT

Those Pacific Island natives that have never met an outsider, and don't know about the outside world at all called. They said, "No shit, Sherlock."
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