You all know the feeling.
You get back from vacation mellow and full of good cheer for your fellow man, and then reality rushes in. It sometimes takes until Monday lunch, but rarely longer. Catching up on stuff I read summaries of the Fed's statement last week. Uncle Ben said he's ready to unleash Quantitative Easing II - QE II - and buy a bunch more stuff and that will set the economy right. The feeling is he will spend $1 trillion buying longer dated Treasuries to force interest rates down and revive bank lending. The stock market seemed to like it and rallied. The rally was also credited to a hedge fund manager that has been unusually good. But if the mountains of cash that drift around the world are funneled to a market because one guy touts the advantages of said market, we are grasping at thin straws indeed.
And why bother with another round of Fed spending?
We spent, or the Fed did, over $1.5 trillion buying mortgage securities, agency paper, and some Treasuries and we have over a trillion of that still on deposit at the Fed. And we still have the fear of deflation, although that seems to have eased the last week or so. I suppose another trillion can't hurt, but I don't see how it helps. Large scale asset purchases would lower rates but that's not the problem. The problem is the consumer is way overleveraged and lacking in confidence. For banks to start lending you need loan demand. The small businesses that need the money don't qualify and the big guys the government wants to borrow have lots of cash.