Thursday, October 18, 2012

The Fed's Unintended (As In "Self-Defeating") Consequences

Interesting quote from Goldman Sachs today:
"Once the price of Brent crude /oil/ reaches $125 /per barrel/, global economic growth becomes challenged and ultimately makes QE self-defeating. "

(Today, Brent crude is trading at $113.)

And from Zero Hedge regarding oil:
"The unending efforts of our glorious central-banking planners to raise asset prices and encourage 'animal spirits' through the trickle-down of unicorn-tears via the wealth effect have side-effects. Unintended consequences of 'leaking liquidity' finding its way into hard assets and 'things that have relatively limited supply' have stalled hopes of a stimulus in China (/due to high/ food inflation) and caused refis to mysteriously lag on misplaced future rate expectations in the US (ZIRP /the Fed's Zero Interest Rate Policy/). The biggest 'problem' the central-bankers face, however, is energy prices. The liquidity surges directly impact the price of oil (which is already under pressure from the ever-igniting fears of Middle-East flare-ups)."