It’s not “stimulus” if it’s open-ended

Totally agree with Peter Boockvar here:

Two more things post Powell presser. The Fed Chair said that three years of no rates hikes in their estimates, assuming all else equal, is essentially forward guidance and he expressed his view that this is a “powerful” stimulus. I’ll express again my belief that it is actually the exact opposite. The whole point of stimulus is to stimulate economic behavior to happen today instead of waiting until tomorrow. Telling us that rates will stay low seemingly forever creates NO sense of urgency to act now. Thus, it is an economic depressant instead. Just look at the experiments of the BoJ, ECB and the US under Bernanke and Yellen and the anemic growth rates seen under the same monetary thesis.

Josh here – Imagine a car dealership:

For the next two weeks, zero dollars down and zero percent financing on a new Yukon! Act now, offer expires September 30th! 

Or…

Zero percent financing pretty much forever. Come on in anytime you want between now and 2023! 

Which presentation brings in more economic activity to the dealership? Using monetary policy as a form of economic stimulus works along the same lines. Or, at least, it’s assumed to work along the same lines. Giving people a sense that there’s no rush to do anything works precisely counter to the Fed’s intent. Better off adopting the Greenspanese pronouncements where no one’s exactly sure of what you’re saying. That sphinx-like motherf***er could produce economic bubbles at will – with his eyes closed (literally!).

The good news is, the housing market is already going wild as is corporate borrowing so whatever.

 

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