Friday, June 24, 2011
- The End Of QE2
Drew Matus the UBS Senior Economist shown above, is an old friend of mine. He and I were chained to the same oar once, back at one of our mutual former employers. (No... I'm not the guy who annoyed him with the FOMC name.) I don't fully agree with him in this case. With the S&P at 1,250, I agree that the odds of QE3 are zero. Let's see what the odds are with the S&P at 1050 or the unemployment rate rising meaningfully.
The fact is, the Afghan troop draw down, and the SPR release have both been blatantly political moves by the Whitehouse to shore up their flagging poll numbers. Can you imagine someone so willing to toss the furniture on the fire for political gain isn't going to pressure the hell out of Bernanke? He may be independent, but he's still subject to influence.
As a total aside, back when Drew and I worked together, there was a big debate about the Euro. He and I were on the same side then in our belief that the Euro as a currency would never last. We would each argue against the opposition that there is too big a difference between Saxony and Bavaria to get along, so there was no way the rest of Europe would work things out.
Clearly we were right about the cultural differences being a big problem, it's just that I was wrong about the specific difference that would be an issue. In the next few weeks, it looks very much like we'll find out if we were right or not on the bigger question.