No QE3

As there was NOT an ocean liner named Queen Elizabeth III, so there should not be a Quantitative Easing III.

Why?

There is no need for it.  The economy now has all the monetary base it needs to grow and interest rates (short and long term) are low enough.  Low interest rates are not preventing any profitable investments.

What Needs to Be Done?

The problems are now all policy.  Loan growth is low because there are massive new, tighter restrictions on getting a loan.  Mortgage refinancings are far below what should be occurring because good quality borrowers are prevent from obtaining a new loan, by either over restrictive credit policies or by their existing loan being "underwater".  FDIC rules for management of banks causes real loans to be examined much harder than speculations in securities.

In sum, the problems are ALL now policy problems under the purview of Obama.  And he is doing nothing ... need I refer to the old fable about Nero fiddling while Rome burns?

Partial Solutions.

1.  FNMA and Freddie Mac should lower credit standards to permit refinancings of ANY loan currently not in default.  I mean ANY loan, regardless of credit score or low-to-value ratio.  After all, the government ALREADY has that risk, and the loan gets better IF the debt service payments fall.

2.  Force banks to make real loans and not speculate in securities.  The banking system does NOT exist to faciliate the speculation in securities or derivatives or any similar thing.  It exists to make LOANS:  old-fashioned commercial and industrial LOANS.

All this is rather obvious.  One wonders why these have not been done.  After all, it's 2011, not 2009.  Policymakers have had two years to "study" the problems.  They have failed.  Maybe those people should have their pay and benefits cut for "failure to achieve objectives".

Word of the Day

"Fugacious" - adjective [$10] literary
Fugacious means fleeting, evanescent, hard to capture or keep.
Sentence:  Fat fees and fugacious fame of hedge fund managers is a fraud on the foolish rich.  Example:  John Pauson's flagship fund is down 38% this year.  So much for his "genius".  He and most of those knaves just roll the dice with OPM, get lucky one year and the next year loses.  Sigh ...