Well there you have it, we are really on our way to the ZIRP now. Not only is the fed pumping money into bank reserves and beginning the quantitative easing that folks have been talking about, we are now 75% closer to free money!
This is the first time that we’ve had a range that I am aware of. The federal reserve hasn’t specifically stated that they are engaging in qantitative easing yet, but they sure did hint that they are going to do it. Take a look at this quote:
The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.
And then this one… (emphasis mine)
In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
There you have it. The tools are out of the toolbox per Mr. Bernanke’s speeches a few years ago. We are going to ZIRP, starting quantitative easing and effectivally commiting to long term lowering interest rates. Those are some of the specific policies that had been discussed.
Net effect, in my belief the market rises and continues in an Elliot Wave Four up. This ties into my overall Christmas rally perspective of things. We’ll see how this all plays out. Oh yeah, one more thing…
As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.
Basically, we’re happy to provide whatever you need. The printing presses have been turned on.
