Chair Yellen … Please Continue, the Economy can handle it, and may need it!

Tomorrow and Wednesday mark another FOMC meeting.  It is expected they will reduce asset purchases by another $10 billion per month to a new $35 billion monthly level ($85 billion monthly near the start of 2014.)  We look forward to Chair Janet Yellen’s public testimony on hump day for clarification and guidance

If it has not happened by now it will not

Quantitative Easing aka QE or the purchase of fixed instruments by the FED to lower rates was a clever and handy tool when first used, but has overstayed its welcome. Rates have been low enough for long enough, we think it’s done all it can do!

The side effect of such purchases are a ballooning balance sheet (the FED creates money synthetically to buy the assets … not to worry there is a debit and credit entry for those accountant likes).

Here is a chart from our friends at JPMorgan of the afore mentioned balance sheet that also finds its way into our upcoming newsletter (that’s Trillions $$$) … getting pretty big!

Feds Balance sheet

The FED has a problem

In our coming newsletter we have an article concerning the FED’s ability to raise rates with so much extra money sloshing around in the system, which is a direct byproduct of the QE.

Janet … Go ahead and continue to slow those asset purchases (or even go more than $10 billion reduction) please! The US economy can handle it.

John A. Kvale, CFA, CFP

www.jkfinancialinc.com
www.street-cents.com
8222 Douglas Ave #590
Dallas, TX 75225

 


Filed under: Interest Rates, Investing/Financial Planning Tagged: FED, FOMC, Janet Yellen, QE, QE Taper, Taper

About the author

John Kvale
John Kvale

John A. Kvale CFA, CFP, is the founder of J.K. Financial, Inc. and with 22 years of industry experience is currently the president of J.K.Financial, a fee only financial planning and wealth management firm. J.K. Financial specializes in wealth management, adhering to unique approaches to investing in the capital markets. The company has a global presence, serving individual and institutional clients across the United States as well as several foreign countries.

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