Register  
Big Ben boosta
Tuesday, 27 March 2012 9:40am

"I did my best
But I guess my best wasn't good enough
Just once can't we figure out what we keep doing wrong
Why we never last for very long
What are we doing wrong
Just once can't we find a way to finally make it right
Make the magic last for more than just one night
If we could just get to it
I know we could break through it."

It didn't take long, did it? It took only a few days of Wall Street experiencing an attack of the wobbles and here we have our ol' friend Ben calming nerves with a karaoke rendition of James Ingrams's classic, "Just Once". Wall Street applauded, and with a standing ovation at that.

Wall Street seemed content enough to trade up on indications of strengthening momentum in the US economy - something most didn't expect at 2012's open. But not Ben, he wants to "make the magic last for more than just one night".

The Fed Chairman said so himself when he addressed the National Association for Business Economics Annual Conference in Washington last night. "A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed," undoubtedly helped by the Fed's cheap and easy money policies.

The Fed has kept interest rates at 0-0.25% since December 2008, bought around US$2,300,000,000,000 worth of US Treasuries and pledged to keep the fed funds rate at "exceptionally low" levels "at least through late 2014".

But it ain't good enough. We need another QE - at least this was what he implied last night.

" ... conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force. Moreover, we cannot yet be sure that the recent pace of improvement in the labor market will be sustained."

What do we need? " ... further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies."

He argued that, "both cyclical and structural forces have doubtless contributed to the increase in long-term unemployment, the continued weakness in aggregate demand is likely the predominant factor".

What do we need? "If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well."

But "if this hypothesis is wrong and structural factors are in fact explaining much of the increase in long-term unemployment, then the scope for countercyclical policies to address this problem will be more limited."

Still, "it will become even more important to take the steps needed to ensure that workers are able to obtain the skills needed to meet the demands of our rapidly changing economy."

And with these words, Big Ben has laid out the groundwork for another QE. He's shovel ready. Although at this point, I don't think we're quite at that point yet where another QE is imminent.

It might be too slow for Ben's taste, but the US economy is already picking up momentum and the virtuous cycle has started to spin, energising not only American consumers and businesses but also the rest of the global community.

At the end of the day, it's good news all around for risk assets. It'll be better of course if these are backed by continued improvement in activity and growth fundamentals.

But if not, there's always the Big Ben boost to fall back on.

Blogs
Follow the industry experts.
Christopher Page
Christopher Page
Managing Director

Medcraft's appalling speech
I am surprised. More than that, I am astonished, shocked. Last week I was left speechless by the address that the Australian Securities ...read more
 
Benjamin Ong
Benjamin Ong
Chief Economist

Reflation, rotation and the taper
'Tis being my final type (drivel, to some gentle readers) for the year, we'll take a look back at the 2013 that was to seek the lessons ... read more
 
Alex Dunnin
Alex Dunnin
Director of Research & Editorial Services

Women-led companies better for investors
The Australian government end last year released its first Gender Equality Scorecard and while the results are discouraging, a separate ... read more
News Search   
VideoBrought to you by
The major economies in 2015
Is the European economy dead in the water? Is faith on Abenomics waning? Why should investors be more optimistic about the US economy this year? Chris Probyn, the Boston-based chief economist of State ... Watch video
Market Thinking - A different way of looking at economies?
First, a confession. Mark may have started his career as an economist but he joins this year's panel not as a chief economist but as the head AXA Framlington Asia. This is to the benefit of the audience ... Watch video
Great unwindings
Bob believes plunging oil prices may extend the stockmarket rally by a year or two and discusses why investors could expect a volatile few months. Overall, he believes we are entering an era of low returns ... Watch video
The global and Australian economic outlook
The anchor man of the panel, Saul provides great insights on the domestic economy. And bravely makes the forecast that the Reserve Bank will not cut interest rates this year and that the next move is up ... Watch video
The two-speed economy in reverse
James provides a local perspective and explains to the audience why the mining investment boom is an aberration and it is now a 'return to the old normal'. To view James Bond's slides please click ... Watch video
Get it
Daily
FREE to your inbox, get the Financial Standard Daily Email.
Get the Free
iPad app
Download the Financial Standard iPad app for FREE
Industry
Events
MAR
05
MAR
10
Adviser Big Day Out Investment Manager Roadshow-Perth
11
Adviser Big Day Out Investment Manager Roadshow-Adelaide
12
Adviser Big Day Out Investment Manager Roadshow-Melbourne
18
Adviser Big Day Out Investment Manager Roadshow-Brisbane
19
Adviser Big Day Out Investment Manager Roadshow-Sydney
News
Bites

$245 (inc GST) for 1 year
 
 
Copyright © 1992-2015 Rainmaker Group
All material on this site is subject to copyright. All rights reserved. No part of this material may be reproduced, translated, transmitted, framed or stored in a retrieval system for public or private use without the written permission of the publisher.
Link to something 7lM4aWkE