To QE-3 Or Not To QE-3, That Is The Question
Almost every investor is standing by waiting for the Federal Reserve Chairman, Ben Bernanke, to make some type of comment regarding another round of quantitative easing. In other words, will there be QE-3 if the markets keep falling. It is important to note that the key bank lending rate, which is called the fed funds rate, has been at 0% since December 2008. when you add the current U.S. Treasury purchasing program to the picture it actually makes the key bank lending rate more like minus 0.75 percent. This is a calculation comes from Ben Bernanke himself in his latest interview with 60 Minutes. Is it true that the stock market can only trade higher if the Federal Reserve increases the cash reserves? So it seems at this time.
The highly followed and traded "too big to fail" banks have been declining sharply over the past few months. Today, leading bank stocks such as Bank of America Corp.(NYSE:BAC), Wells Fargo & Co.(NYSE:WFC), Citigroup Inc.(NYSE:C), and others are trading at new monthly lows. Is this the sign of a healthy economy? At some point, the Federal Reserve will have to make a decision on whether to do another stimulus plan or let the markets fall where they may. Many prominent politicians such as Ron Paul(R-Texas) feel that the central bank should eventually be abolished due to the bubbles that have been manufactured over the past 100 years. Since the Federal Bank is the third central bank that the United States has had since being formed the country has been through this process before. Ron Paul's sentiment about the central bank is now picking up steam with many other politicians as he is the Chairman of the Financial Subcommittee overseeing the Federal Reserve.
Oh well, we shall see soon enough if Chairman Bernanke hints that another round of U.S. Treasury purchases will take place anytime soon. Ben Bernanke is scheduled to speak at a conference in Atlanta, Georgia at 3:45 pm this afternoon.