From Trader Mark in March:
Ironically, the more QE to come, the more speculators will drive up commodities … which will impair corporations (who might cut jobs to preserve profit margins) and consumers … which (in the Fed’s mind) will require more QE. Circular logic, anyone? But in The Bernank’s view, his actions only make the stock market go up and not other assets (read: commodities), so he won’t make the connection.
I keep using the word “irony” because this band of economists seems to be lost. While they chant for higher inflation as official policy goal, they are simply imposing a tax on countless people who cannot afford these pricing pressures. The reality is they are aiming for a misguided “wealth effect” mantra that helps the top 10% (and especially top 1%), which is simply a corrupted offshoot of “trickle down economics” dogma (clearly a massive failure for anyone in the bottom two-thirds of this country the past two decades).
This “tax” they are creating has the potential to cause corporations to pull back on hiring, as Wall Street pressures them to hit earnings targets and protect margins. Obviously this is inverse of what the Fed mandate is. Let us see how the hiring picture plays out in the next three to six months to see if my theory is playing out.
In my opinion, the best thing the Fed could do is state to the world there is zero chance of QE3. The dollar would rally, commodities would be crushed, and Main Street would benefit. But that action might hurt Wall Street, and since the country is run for the select few, I expect Fed policy to continue down the same road. We’ve had two middling quarters of growth during QE2, so as we all know, if it doesn’t work the first or second time, just keep repeating it. Surely the third (or fourth, fifth, nth) time will be the charm.
via A Vote Against QE3 – Seeking Alpha.