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For the last two years, the U.S. economy has been supported by the twin catalysts of fiscal and monetary stimuli.
Fiscal stimulus seems likely to continue for some time yet - even the most avid Tea Party budget cutters don't see their way to cutting more than $100 billion or so off this year's $1.6 trillion deficit.
But monetary stimulus is another matter.
The Fed's so-called "QE2" (quantitative easing/second round) purchases of U.S. Treasury bonds are supposed to come to a sharp end on June 30. That makes July a crucial month - for the American economy, for the country's bond markets and, most of all, for the performance of the dollar.
These crucial monetary-policy issues will be reviewed at the two-day policymaking FOMC meeting that begins today (Tuesday) and concludes tomorrow. Policymakers are expected to leave the benchmark Federal Funds target rate in its current range of 0.00% to 0.25%.
If Bernanke wants to devise a "QE3" to follow his QE2, he needs to do it now: The next FOMC meeting is in late June, which is far too close to the expiration of QE2.
The decision as to whether to end quantitative easing - or to extend it - will be a tough one, made no easier by the fact that there is a substantial-and-growing group in the FOMC that did not like QE2 and that will strongly resist a QE3.
This "anti-easing" contingent has a strong case - and its arguments will be bolstered by figures that show inflation taking off.
Bernanke can resist these arguments for a time - either by focusing on "core" inflation, which excludes food and energy, or by looking at the "Personal Consumption Expenditures" (PCE) deflator, which is reported a couple of months in arrears. However, even with only one additional set of data from the present, he may find it difficult to argue that inflation is no longer a problem - in which case QE3 will be impossible to launch.
And without QE3, the U.S. Treasury bond market will be in real trouble.
With the U.S. market straining under the burden of rising inflation and some ill-advised monetary and fiscal moves, the death of the dollar is looming as a worst-case - but still possible - scenario.
The Fed has one chance to avoid this outcome.
But it has to act tomorrow.
Just to have a chance of staying level with inflation. U.S. central bank policymakers must boost short-term interest rates at least to the 3% level. That would burst the global commodities bubble, and reduce inflationary pressures.
With that accomplished, the Fed could then - if Bernanke & Co. wished - continue with a "modified QE3." For instance, perhaps it could buy $50 billion of bonds in the third quarter and $25 billion in the fourth quarter, thus breaking the Treasury bond market off its "Fed-bond-purchase fix," instead of making the market quit "cold turkey."
With inflationary pressure reduced by the interest-rate increase, the chances of a Treasury-bond-market meltdown would thus be reduced to almost zero. Interest rates would rise and bond prices would decline, but in an orderly manner. And inflation, if it continued, would do so at a more-moderate pace.
In fact, even inflation - should it remain stronger-than-desired - could be moderated, simply by raising rates a bit more, perhaps in several increments.
And the U.S. dollar would be saved.
There's only one problem with this scenario: I don't think it will happen. Bernanke won't boost rates. And we'll be back here sometime in the future, writing the epitaph for the death of the dollar. |
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狗仔卡
发表于 2011-4-26 09:40 PM
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发表于 2011-4-26 10:02 PM
