Hey folk
on 20 -21 Sep, the FED is having a meeting. Would FED chairman come up with QE3???
My take is probably would, if not this month then next month.
US have got no other way out to simulate the economy. QE 1 1.7 Trillion money print and flood the market, QE2 600 Bil money printed and flood the market. Interest rate at real low value, but there is no way the economy is simulated at all. Cash printed are flowing into emerging economy, (where are those countries?? Asia Ex Jap). Obama have said that to keep interest rate at low level till 2013, which mean to say there will be lots of uncertainty till then.
In due of the president election next year, the democrat and the republican are still playing political game even their country are facing such a crisis.
USD is still the safe heaven currency only because they are still the world number one in term of most traded currency. You need to deal in USD for many things eg buy oil. Bonds market which has the highest liquidity in the world have almost half traded in USD.Which mean that in the world of uncertainty, USD is still the better currency.
If QE3 were to realize, it would have the same effect, they will buy long term bonds, they will flood the market and try to simulate the economy. The equity market will go up, but not the economy. USD will also be strong against other currency as in the uncertain situation, USD is still a safer currency. But it would not last long being strong. It will be weaken by excess supply and inflation take place.
The money printed will flow to emerging market. Then emerging market will get overheated and they will try every possibility to try to fight inflation. This cycle happen and happen again.
