QE3 is Working
QE3 is working!
How do I know? Housing starts are up! This is the economic savior that the country has been waiting for, and it is all thanks to Ben Bernanke and crew.
Now you might be asking, “Housing starts may be up, but how can you say that QE3 is the cause?”
In both the run-up to and the aftermath of the Federal Reserve’s announcement of a third round of money creation and bond-buying—quantitative easing—known as QE3, the fashionable position on Wall Street and among the financial commentariat was that it wouldn’t work. Sure, the thinking went, the Fed might be able to set off a rally in financial markets such as stocks and commodities, but it won’t be able to do anything for the real economy.
Such thoughts were often delivered with a world-weary sigh and frequently while wearing a bow-tie.
And like plenty of positions that become popular in and around Wall Street, these views turned out to be two things: Dead. And wrong.
There’s really no other way to explain the massive—and apparently strengthening—turnaround that we’ve seen in housing lately except for the Fed.
Well I had never heard of Quartz before this week, but boy am I glad that I did. Apparently they can predict the future over there.
You see, QE3 was announced barely a month ago. The data on its effect on the money supply hasn’t even been released and therefore, unless you know the future, it is impossible to say how QE3 has affected housing (or anything else).
Quick primer for the unFEDucated…Fed money printing can either go into excess reserves held at the Fed, or into the money supply in circulation (M2). If it goes into excess reserves, then there is no effect on the money supply and thus no effect on housing (or anything else).
Until the numbers are released by the Fed, it is impossible to know where the money actually went.
Well guess what, the numbers for September excess reserves aren’t even up yet, so Matt Phillips is crediting future statistics for current events!
Here is the chart (note the end date):
M2 numbers are out through September, and here they are:
Well the $500,000,000,000 increase in M2 just this year is surely having an effect on housing (and gas prices, and food prices, and every other thing that dollars are used to purchase), but I had no idea that QE3 was already having an effect on housing.
And how could I? I can’t tell the future like Matt Phillips.
So after reading WisdomHunt, you have my blessing to read about future statistics and how they explain current economic events over at Qz.com.