Bill Gross on Wednesday said the Federal Reserve will likely hint at a third round of bond purchases, better known as "quantitative easing," at its next Jackson Hole meeting in August.
Jackson Hole is an annual global central banking conference, led by the Fed, which takes place at Jackson Hole, Wyoming. It was at this event last year that Fed chairman Ben Bernanke said the U.S. policymakers were prepared to make a major new investment in government debt or mortgage securities if the economy worsened significantly or if the Fed detected deflation -- a prolonged drop in prices of wages, goods and assets like homes and stocks.
Gross, the co-chief investment officer of PIMCO, the world's top bond manager, on Wednesday said on Twitter: "Next Jackson Hole in August will likely hint at QE3 / interest rate caps."
In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic. In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." (He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."
Sir Mervyn also indicated yesterday that a large cash injection directly into the economy to boost asset prices and spending was possible.
Ferru123 wrote:superfrank wrote:No interest rate rises until unemployment drops and the economy grows, says Mervyn King
So that rules out an increase in interest rates for at least the next 3 years then...
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