Friday, September 14, 2012

The Verdict is Out. There is QE3!

WSJ, 9/13/2012, "Fed to Buy More Bonds in Bid to Spur Economy" By KRISTINA PETERSON, JON HILSENRATH and MICHAEL S. DERBY


Federal Reserve Bank of Richmond President Jeffrey Lacker 對 QE3 以及 Fed 宣示要在 2015 年年中以前都將短期利率壓在零左右(早先是說到 2014 年底)這兩個議題都投反對票,不過他是唯一的反對者。我沒有花功夫去研究 Fed 所有 Governors 的鷹派和鴿派屬性,因此這個 11-1 的票數是否應該讓人驚訝,等明天看看分析再說。

股市對此政策會有反應,Dow Jones 幾乎是反應這個訊息的發佈而當下立漲了 1.3% 左右,明天全球其他地區的股市應該也是上漲的機率為高。昨天一篇 WSJ 的文章 (Economists Are Uncertain More Fed Moves Will Work) 對 51 位業界和學界的經濟學家的調查(WSJ 沒有揭露名單),其中在對於是否及什麼時候 Fed 會宣佈實施 QE3 這個問題,有作答的 43 個人裡面 34 個說九月(也就是這兩天),說今年不會實行的只有 5 個人。但是問到 Fed 應不應該施行 QE3 的時候,作答的 45 個人中說應該的是 17 個,說不的有 28 個。


QE3 理論上會讓美金貶值,不過台幣對美金最近強了一陣子,我猜多半是對 QE3 的預期造成的。台灣最近出口表現不好,整體經濟情況也差,照理講沒有太多貨幣走強的道理。如果是因為對未來的預期,那大概就是這件事情。由於 QE3 幅度沒有早先的 QE 來的大,所以效果應該也比較有限。由於先前已經反應了一部份,所以我猜台幣明天應該強勢有限,而且再強下去央行大概也會出來重手干預了。別忘了,最近出口很慘。

股市應該會有一小段 "sugar rush",不要把它當作是景氣向上反轉的指標了,沒有那麼快。


Ben said...

CC, this is not the game 7 of the World Series, and you stayed up for this:)

Well, Professor Bernake, let's hope that your thesis from all those years ago was correct.

We live in interesting time.

P.S. It is official now....Romney has just lost the election.

CCLu said...


I got that QE3 news right before I decided to call it a night and turned off my computer. BTW, I stayed up late for iPhone 5 release the night before too.:p

I think Romney is out after his disappointing convention bounce. With less political uncertainty in place, we know better what the future holds. There are bumpy roads ahead of us, so buckle up and move on.

aju said...

想跟您請教文中的"QE3 幅度沒有早先的 QE 來的大"的意思是?因為我看到的是無限期無限量的QE 直到就業好轉,所以在這點有些疑惑

CCLu said...

To aju,

這次的 QE 是每月 $40BN,加上 Operation Twist 才有 $85BN。早先的 QE 讓 Federal Reserve 的 balance sheet 增加上 trillion 美元。


「無限期」這個說法只是說政策沒有一個訂死的到期日,不表示它能夠無限執行下去。就算失業狀況一直沒有好轉,當通貨膨脹威脅出現或是 Fed 發現子彈用完了,不停也得停。

Ben said...

More than anything else, the following answer by Bernake during the Q&A really scared the s*&t out of me:

“The tools we have involve affecting financial asset prices. Those are the tools of monetary policy. There are a number of different channels. Mortgage rates, other rates, I mentioned corporate bond rates. Also the prices of various assets. For example, the prices of homes. To the extent that the prices of homes begin to rise, consumers will feel wealthier, they’ll begin to feel more disposed to spend. If home prices are rising they may feel more may be more willing to buy home because they think they’ll make a better return on that purchase. So house prices is one vehicle. Stock prices – many people own stocks directly or indirectly. The issue here is whether improving asset prices will make people more willing to spend. One of the main concerns that firms have is that there is not enough demand…if people feel their financial position is better they’ll be more likely to spend….”

Bernake is purposely blowing another asset bubble to encourage consumer spending. This is as if the last two bubbles never happened. I am not an economist, but this is voodoo economics if you ask me. Any thoughts on this, CC?

CBCT said...

當其他所有貨幣對美元都在QE3 之前走強, QE3出爐後升破新高,央行能做的也不過是壓住台幣不強過其他競爭貨幣,維持一個相對其他非美貨幣的弱勢也就是央行能做的最大努力了.在前兩個月出口數字最差的時候沒能趁勢有效貶破30元, 接下來的月份就難矣
Bernake 讓美元價值對內對外全面崩跌以擠出最大可能的消費及出口替代.目前的美元跌勢要等下一個危機出現, 致使美元的避險需求再湧現時才可能停下來吧?

CBCT said...

拜讀您的指導很久了, 第一次在這兒留言, 連先向您問好的基本禮節都忘了,真不好意思
謝謝您的大作, 個人從這獲益良多

YMMN said...


CCLu said...

To Ben,

I'm not worrying too much about asset bubbles just yet. Let's forget that I don't like the word "bubble" for a while. I'll play along for the sake of this discussion.

The stock market is a good representative of the economy, but it is just a representative, not the whole economy per se. The U.S. economy is still weak, but some big companies are doing fine like they did before the financial crisis. Their prices are real, or at least most of them. I didn't pay attention to the latest P/E ratio of the market, but I think it's still in the high end of the reasonable range.

Besides, an asset bubble is far less dangerous than extra risk-taking by the whole financial industry. Remember the Internet bubble in the beginning of the century? The whole world recovered from it rather more quickly. Granted that the health of the economy right now cannot compare to the health of the economy back then, but an equity bubble is not something to keep me up at night. People got hurt from the burst of the bubble, no doubt of that, but it can also help to allocate resources more efficiently.

As you said in a previous e-mail or comment, don't fight the Fed, go along with it. QE3 is out of the gate and we can't help it. Ride this wave for a little longer because it probably will last a little longer than we expected without it. My bet is a big correction won't come around soon, at least not before Obama being re-elected. Even then, we'll see real danger when the CPI spikes. Fed will have to decide what they are gonna do, and that is not a pair of shoes I'd like to be in.

CCLu said...


我沒有內線消息,不過從央行過往的作為來看,他們在年底前會努力把匯率拉回一些的。就算沒有辦法拉到 NT$30/$ 以下,他們也會朝這個方向努力。


CCLu said...



Ben said...

I agree 100% that the market is not the economy, only a reflection of the economy. But, with all the CB interventions, I am not so sure that's the case any more. Not to mention that the Fed is trying to use the market to create the wealth effect so that people will spend more....circular logic, no?

Valuation is a subjective issue. I personally think it is quite expensive, but we just have to agree to disagree.

>>Besides, an asset bubble is far less dangerous than extra risk-taking by the whole financial industry<<

Don't they go hand in hand together? It is hard to get an asset bubble without some sort of "financial innovation." And the internet bubble "felt" relatively minor because the government traded the housing bubble for the internet bubble.

>>People got hurt from the burst of the bubble, no doubt of that, but it can also help to allocate resources more efficiently.<<

I agree. The market's job is to help allocate resources, and market corrections are meant to get rid of the excesses. But we no long have a functioning free market if the Fed is telling people "don't worry, keep buying, I will have your back." If this is not a moral hazard, I don't know what is.

>>As you said in a previous e-mail or comment, don't fight the Fed, go along with it. QE3 is out of the gate and we can't help it. Ride this wave for a little longer because it probably will last a little longer than we expected without it.<<

In addition to the moral hazard issue mentioned above, this also reminds me of the sentiment at the top of the internet bubble. People knew that it was a bubble and most thought they could get out right before it pops. Few did.

My problem with the aforementioned Bernake statement is that asset prices don't always accurately reflect their underlying values. Asset prices reflect the summation of the decisions of the inefficient participants who are engaged in the buying and selling of those assets. And that's why we have bubbles throughout our financial history. CC, I know that you have a different view on bubbles. I respect that greatly but we just have to agree to disagree.

CCLu said...

To Ben,

The problem of the 2007-09 financial crisis is so bad because it is mostly debt-induced. Kenneth Rogoff's "This time is different" taught us that.

It's hard to categorize whether this asset bubble is debt-induced because its unorthodox nature. I think a fat balanced sheet owned by the Fed is still different from the same thing seen in the private banks.

I don't like this QE, perhaps even hate it. As long as the debt balance is not off the chart (I mean the private one, we do care about the public debt, but that's another issue), I still think the potential damage from the asset bubble is not as big as we've seen in the recent past.

The real danger would come from inflation, that can wipe out government benefits real quick. According to Greg Mankiw, the proportion of U.S. households receiving some sort of government benefits exceeds 50% this year. When the equity level of the bottom 50% households is low and the income has turned back to 1995 level, the next President (presumably Barack Obama) will have a tough job to do once the price level is out of control.

Ben said...

CC, a few quick thoughts:

- Junk bond yield just hit an all time low on Friday at 6.344%. No bubble there:))

- When it comes time to unwind the Fed's balance sheet, it will not be easy. With all the long-dated securities on its balance sheet, it doesn't take much to wipe out Fed's net equity, which stands around $57 billion today. Of course, it will be the tax payers who will eventually be responsible for the deficits on the Fed's balance sheet.

- A common strategy to create extra incomes in today's low yield environment is to buy "stable", income-producing stocks (and if one is daring, buy lower-quality bonds or even PIIGS bonds) with borrowed money. Ever wonder why MF Global went out of business so quickly? Math is simple - borrow at 1.5% or lower and buy 'blue chip' stocks yielding at 3% or higher. Do this a few times and pretty soon you will have a portfolio yielding 6-8% with capital appreciation potential. That's why you see companies out there borrowing at record-low interest rates to pay ever-increasing dividends. Why invest in risky projects when the CEOs can increase stock prices simply by hiking dividend yields? No bubble there either:)

More Americans are on food stamps today than before, and that is a truly depressing fact. And I am willing to bet that the bottom 50% of American households actually have a negative net worth!

Your comments on inflation were right on.

CCLu said...

To Ben,

I'd like to see the spread, but 6.34% pretty much guarantees a very low spread in historical perspective.

I totally agree it is going to suck when the Fed is trying to unwind its position, but it is also probably not as bad as we are looking right now. They will only shrink their balance sheet when the economy is going well. In that case, unwinding would be a much easier job than we thought.

That being said, an amount that huge can never be an easy thing.

I don't buy boosting the economy with the wealth effect, but it is not total nonsense to squeeze the money into taking higher risks. The problem is whether taking higher risks leads to higher return in average, or the higher return is only generated by money being squeezed into that asset class.

It is usually hard to tell it's the dog wags its tail or the tail is wagging the dog.

As a believer in efficient market hypothesis, I shouldn't doubt that the market will price the assets right. The thing is the theory has to take government into account. Government, as we know, is not the source of stability.

CBCT said...

盧老師您雖沒有內線消息, 但您有很敏銳的觀察力. 如果您在研究室有彭博資訊系統, 就可以輕易看出台灣央行其實用的是最cheap 的手段, 也就是每天作一個收盤價, 這個收盤價與全日的實際匯價都有近0.4%的差距. 再宣稱外匯局長很super, 台幣匯價動態穩定.

這是幫助出口商嗎?大謬也.出口商賣匯都是在收盤價以下0.4%的區間, 這個收盤價只對央行自己的部位有意義. 既然沒幫到出口商 那就是幫到進口商囉? 我懷疑新台幣在目前的29.35還沒升到頂. 進口商在這裡買美元亦沒有抵銷多少美元debase 之後增加的成本.

以現在新台幣每天的外匯交易成交量7到8億美元, 約等於韓國匯市日成交量的十分之一.但是韓國的外貿活動水準充其量只是台灣的兩倍!這說明如果不是韓國人太熱衷韓圜外匯交易就是台灣的交易太過壓抑. 韓圜的波動率比台幣高,台灣央行沾沾自喜於其壓抑台灣金融活力, 但如此的壓抑換得了什麼? 台灣有比韓國好的實質經濟成長, 技術革新或是實質利率嗎? 台灣的10年殖利率從08年開始在1.2-1.6 狹窄的40個基本點區間躺了5年, 不要說不如韓國的兩百個基本點的區間, 甚至比日本的60個基本點還窄. 我不知道這樣的環境有什麼好值得Global Finance 年年給彭淮南一個A級, 彭又有什麼可驕傲的??

小起飛 said...

I don't really understand why 通貨緊縮這個問題似乎早就過去了。
事實上Bernanke 會推出QE3恐怕就是擔心通貨緊縮再度來臨, 以下有人已整理數據

CCLu said...




謝謝你的實務說明,央行這種做法我曾經在一個 EMBA 學生的口試上聽過類似的敘述。我自己對於彭的評價一向也不高,之前也討論過相關的話題。

CCLu said...

To 小起飛

通貨緊縮和衰退常常結合在一起,這是 2007-09 發生的事情。現在大家擔心的其實是通貨膨脹,許多反對 QE 的學界或業界的經濟學家的反對原因在這裡。

Bernanke 由於他自己的研究興趣在 Great Depression,很清楚當年在不景氣的當下收緊銀根有什麼效果,也採取了適當的措施。我們現在應該已經過了那個階段了。你所引的圖是用 inflation 來看,如果換成 CPI,就會發現現在情況跟 2007-09 的 recession (特別是 08-09 那一段) 差很遠。現在物價上漲速度減緩並不是壞事,等通膨再降一些再緊張也不遲。

QE3 主要的政策目標是提升經濟成長和降低失業率,不是在擔心緊縮。當然這些現象也常同時發生就是了,但是最近其實真的沒有什麼人在談通貨緊縮這回事情。最擔心的還是全球經濟再度陷入衰退。