Going Nowhere In A Hurry?…To suggest that the theoretical end of QE2 has been and continues to be widely anticipated by investors is an incredible understatement. Opinions on financial market and well as real world economic outcomes diverge widely.
The two QEs have been an unprecedented journey in the annals of Fed and US economic history. We’d like to take a very quick look at what we hope is relevant data from the recent Fed Flow of Funds report relating to what has been and has not been accomplished in the macro over what is close to the last two years. Clearly a key macro over the remainder of this year and into next is the need for the private sector to grab the economic growth and credit cycle acceleration baton from both the Fed and Federal Government as supposedly QE and Government stimulus wind down on a rate of change basis.
Important bottom line issue being, the Federal Government and the Fed have been the key provocateurs of the continuance of the decades long US credit cycle expansion over the last three years as the private sector has spent meaningful time in the balance sheet repair shop. As the Fed and Government are slated to be a much lesser force in macro credit cycle expansion dead ahead, is the private sector now ready to again move the macro credit cycle ball continually down the field? Personally, we’re not so sure. And this clearly has very meaningful implications for outcomes in a post stimulus world.