Quantitative Appeasing

“Don’t buy anything you don’t understand,” seems to be the most universally ignored advice on Wall St. Some would argue that only a select few understood the toxic assets which brought down companies such as Lehman Brothers in 2008, and accordingly, I argue that the average American would not comprehend such factors. Unfortunately, the consequences of the recession still linger today and apply to Americans who may not have even heard the phrase “Subprime Mortgage Crisis.”

In August, the U.S. unemployment rate fell to 8.1 percent, down from 8.3 percent in July. While this is a significant piece of good news, reflected by the Dow Jones Industrial Average climbing 3.88 percent since the news release from the Bureau of Labor Statistics on September 7th, I believe the Federal Reserve’s (Fed) actions to buy mortgage securities and Treasuries from banks and other investors as part of Quantitative Easing 3 (QE3) will not produce the effect necessary to fix the U.S. economy beyond Wall Street.
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