The U.S. Economy is Caught in a Vicious Cycle
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People's Bank of China on Friday decided to increase the reserve ratio to curb inflation, the market seems to have eliminated the uncertainty. Compared to interest rates, raising the deposit reserve ratio lower negative impact on the economy.
Hong Kong last weekend, bounced back to the real estate secondary market transactions, trading volume returned to the Government introduced the stamp duty before the Jiucheng, real estate stocks higher. Sino Land (00083.HK) rose 2%, Midland Realty (01200.HK) rose 7%. Oil stocks take a good, Sinopec (00386.HK) the parent company of 24.5 billion acquisition of oil and gas projects in Argentina, while the oil (00857.HK)'s Changqing oilfield discovered in the northern region of Gansu, Central County, more than 100 million tons of proved reserves large oil fields, so the oil (00857.HK) rose 1%, Sinopec (00386.HK) rose 3%. Resource stocks rose yesterday, a new high copper prices, Jiangxi Copper (00358.HK) H shares rose 3%. China did not raise interest rates last week, Ping An Insurance (02318.HK) fell 1% against the market trend.
The Fed announced on November 3 QE2 content. $ 600,000,000,000 Fed overweight exclusion, together with the 300 billion U.S. dollars of mortgage-backed securities (MBS) of the return of funds buy bonds before the second quarter of next year, on the scale in line with market expectations. However, we doubt the effectiveness of QE2. Results from the QE1 seems, we all know the quantitative easing program can not rekindle the American economy.
Why QE1 not work? The Fed purchased a total of 1.7 trillion last year, the MBS and U.S. Treasury bonds. Reasonable to put funds into the economy the Federal Reserve, banks have to borrow capital, renewing economic activity, and promote U.S. economic recovery. Unfortunately, wishful thinking has not started. Loan balance of U.S. banks has been reduced since the beginning of 2009, has yet to rebound. Both industrial and commercial business, home mortgages, or credit card loans and commercial mortgages, loans for all areas were seen negative growth.
All the signs are that the U.S. economy is caught in a vicious circle. Consumers are not optimistic about the future, some people have joined the ranks of the unemployed, some are worried that the future will lose their jobs, have increased savings and debt. Enterprises may have considerable cash, but only 75% capacity utilization, lower than the historical average of 80%, first of all have to shelve expansion plans. Then caused the current vicious cycle: consumption will decline, so that operating rates remained low, the company is no longer expand, it will not employ more staff. Not seen the dawn of day the job market, consumption will not improve.
From the perspective of commercial banks, slow economic recovery, credit loans to customers to drop, coupled with expansion plans of companies do not, they do not want to lend new loans. So keeping your money in the bank a safe place to earn a meager existence in the central bank interest rate differential. India's new money the Fed eventually will return to its balance sheet. This explains why the United States still can not see inflationary pressures, the current 1% in the CPI. |
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By :
Jessie Stone
Submitted
2010-12-19 15:34:24 |
Article From Article Mayhem
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