Wednesday, August 17, 2016

We could see Helicopter Money in the US after elections

I don't think the Fed will move on rates this year. The employment figures are very questionable on whether there was much of an improvement because government jobs went up and seasonal adjustments took place. The economy is not particularly strong and the Fed is also concerned that $12-trillion worth of sovereign bonds in Europe are having a negative yield. If they increase interest rates in the US, then the dollar will become too strong for the liking.

The BoE (Bank of England), Fed, ECB (European Central Bank) and the BoJ (Bank of Japan) are still buying a monthly $180-billion worth of bonds. There is large monetization. It is larger actually than when QE1 (quantitative easing) started in the US. This will go on. 

Not much will happen before the election in terms of moving up rates or initiating new programs in the US. But next year, it is quite likely that we will have further monetary easing or the so called helicopter money.