Fed Policy - No Theory, No Evidence, No Transmission Mechanism

Fed Policy - No Theory, No Evidence, No Transmission Mechanism
John P. Hussman, Ph.D.
September 12, 2011
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Undoubtedly, one of the main factors prompting a benign response to what is now virtually certain recession and virtually certain Greek default is the hope that the Fed will launch some new monetary intervention. While Wall Street appears to view the present weakness as a replay of 2010, it is strikingly clear that the evidence tells a different story, with a broad ensemble of data implying near-certainty of oncoming recession (see An Imminent Downturn ).

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My comment...
With $1.6 Trillion of excess bank reserves, and 10-year Treasuries yielding 1.9%, the Federal Reserve is simply an Emperor with no Clothes. We may still get QE3... but it will have zero effect, other than briefly stimulating the stock market. Whoopee!