17th August 2010
It is being dubbed QE2. Not the luxury liner, but quantitative easing round two.
By continuing to buy back mortgage debt the US has resumed a form of QE-lite; a move that many see as the US government trying to stave off the risk of a dreaded double dip recession.
One of the leading bears is Keith R McCullough, chief executive of hedge fund research firm Hedgeye. Writing in Fortune magazine , he says: "Despite the many differences between Japan and the US, there is one similarity that continues to matter most in the risk management model my colleagues and I use at Hedgeye, our research firm — debt as a percentage of GDP.
"Now that the US can't cut interest rates any lower, the only option left on the table is what the Fed just announced it would start doing — buying Treasury debt.
"And that could lead the country to the brink of collapse."
He goes on to say: "What's left if (or when) QE2 doesn't kick start GDP growth? Should we start begging for QE3?"