Mr. Ben S. Bernanke declares……

It’s a big day for Federal Reserve Chairman Ben S. Bernanke. In a much-anticipated speech in Jackson Hole, Wyoming the world expects that the US FED will come up with another round of QE3. The main hope of the world is that quantitative easing 3 Fed would either buy more government bonds or shift existing holdings toward longer-term securities.

It has been found that any Quantitative easing is supposed to help the economy in three ways:

  • By weakening the currency (dollar), it makes. exports more competitive (U.S);
  • By lowering interest rates, which may  boosts the housing market and allows owners to cut mortgage payments or borrow more;
  • and by pushing investors into riskier assets such as stocks, which  prompts a rise in the stock market that puts consumers in a mood to spend more.

But I am very sorry to say hat even if Mr. Ben S. Bernanke declares QE3 there is negligible chances that it will see the daylight of the world. Any decision of Bailout by Obama Government of US Economy will require consent of Republicans too, which will be very tough for Obama Government to get. Hence the probability of declaring cheap money on the streets is far away from reality despite such announcement from FED chief. Even if the cheap money is being floated on the streets, investors will find other avenues of investments more beneficial like  the previous utilization of QE1 and QE2.

Investments will find its way into commodities as international prices will remain on higher side. 

The biggest question that stands in front of the world economy are that:

Does the Fed really want exploit borrowing and consumption and take more risk when they’re still struggling with too much debt?

And does the Fed really want to keep older Americans under punishment by keeping yielding close to zero for two years since they depend on safe, fixed-income investments?

 US economy needs policies to create jobs and no cheap money. Since cheap money will further pump the bubble of commodity prices and making inflation unbearable for emerging and other nations. Various financial assets will soar like any thing along with GOLD making new historic highs since dollar valuations will decline with QE3.

What Lies Ahead…….

The World economy and its speculators are eagerly awaiting and already in the process of spooking stories that another flood of cheap moneys will sail US economy out of the woods of recession. This time it’s not going to be so easy for the world economy. Short term speculations will kill the world markets more in the coming weeks and by the time my readers read the article the action might have been acted. Borrowing and Lending are no longer easy. Indian markets along with other Asian markets might be ready for another collapse which is being disguised by the market speculators.

Indraneel Sen GuptaIndraneel Sen Gupta (neel19414@gmail.com )

Global Macro Economic Researcher and Business Strategist

Master of Economics, MBA in International Business Management, ICWAI (Final)/CWM Final/Journalist

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