Comfort Zone Investing: The QE2 Is Sinking

Filed under: Comfort Zone Investing, Federal Reserve, Currency

Most good deeds never go unpunished. That's certainly the case for the latest effort from the Federal Reserve (the Fed). It wants to pump $600 billion into the economy to keep interest rates low and spur growth. It's called quantitative easing (QE). Unfortunately, that's not how investors are interpreting its latest move. They're seeing it as yet another failed, inflationary, dollar degrading stunt that won't do anyone any good.

As you may remember, the Fed has already injected quite a bit of money into the system through the QE1 program. That was announced back in November of 2008. The Fed declared it would purchase direct obligations of housing-related government sponsored enterprises (GSEs) -- Fannie Mae, Freddie Mac and the Federal Home Loan Banks -- and mortgage backed securities (MBS) backed by Fannie, Freddie and Ginnie Mae. Purchases of up to $100 billion in GSE direct obligations through the Fed's primary dealers (big Wall Street firms and banks) through competitive auctions. Purchases of up to $500 billion in MBS by asset managers selected by a competitive process. Buying to begin by year-end, 2008, and expected to last for several quarters.

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Comfort Zone Investing: The QE2 Is Sinking originally appeared on BloggingStocks on Sat, 20 Nov 2010 10:30:00 EST. Please see our terms for use of feeds.

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