Jobs, factory, inflation data favor easy Fed policy | Reuters: "More Americans filed new claims for jobless aid last week, factory activity slowed in February and consumer prices were flat in January, supporting the argument for the Federal Reserve to maintain its very accommodative monetary policy stance. The reports come after signs of divisions at the Fed over its bond buying program aimed at stimulating the sluggish economic recovery. "If the Fed is looking for evidence to keep their foot to the floor on policy, they are still getting it," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan. Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 362,000, unwinding the bulk of the prior week's decline, the Labor Department said. It said in a second report that consumer prices were flat for a second consecutive month in January as gasoline prices fell and food costs were unchanged after several months of gains."
There's a Feeling of Instability Bubbling Up - WSJ.com: " . . . these days to win a currency war. So long as global consumer-price inflation is low, estimates of spare capacity are high and central banks are willing to "look through" short-term inflation spikes, every country has access to the chief weapon needed to fight the war—ultraloose domestic monetary policy. Indeed, the yen's previous rise partly reflects the Bank of Japan's reluctance to expand its balance sheet as much as the Fed, BOE, or the European Central Bank. At the same time, the global prohibition on competitive devaluations appears asymmetric; countries that have intervened to prevent their currencies rising, such as Switzerland, have so far escaped censure. Goldman Sachs GS -0.60% argues this de-facto global stand-off over currencies represents an unofficial Global Exchange Rate Mechanism. But if the price of avoiding currency wars is even looser monetary policy, this brings risks of a different kind. How policy makers respond to possible new asset-price bubbles will be crucial in determining whether the rest of this decade is a replay of the '70s, the Noughties or something more benign. . . ."
TCW.com - And All Our Yesterdays: "Further, if money is essentially a measure, a unit of exchange, then how can Fed money printing (credit creation) truly and sustainably create wealth? Isn’t true wealth a function of the ability of a business or employee to provide or invent a good or service that has value to another? In that event, pumping up home prices may have some perverse second-order effects. For instance, say you are a renter. The Fed’s policies are helping to drive up not just the price of homes but also of rents. A “typical” young couple has to shell out more for rent today and has a bigger lifetime “nut” to pay in the form of future mortgage payments for that home they aspire to purchase. Do these policies make the couple wealthier – or simply transfer existing wealth? Is there not a fundamental distinction between rising home prices driven by the higher wages of a growing economy versus higher prices resulting from mortgage “price fixing” courtesy of the Fed’s QE?"
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