From Barron's, November 5:
"The Stock Market Wants More Fed Bond Buying. It’s Missing the Point, SocGen’s Edwards Says"
The market is betting that the Federal Reserve could ramp up its bond purchases soon and believes that will be good news for the stock market. Societe Generale strategist Albert Edwards, noted for his dismal views, contends it’s missing the point.
What the economy really needs, Edwards says, is fiscal stimulus
. Election results are pointing to a split Congress, with Democrats in control of the House and Republicans in control of the Senate. Republicans have less political will for massive fiscal spending than Democrats have. Democrats want to see a package of several trillions of dollars, while many on Wall Street expect a Republican-driven bill to be below $1 trillion. Edwards, though, believes that “fiscal stimulus or reform will be off the table for the next two years.”....
.... Investors shouldn’t assume that quantitative easing, or QE, will lift the economy, Edwards writes. “I believe that QE was never very successful in boosting Main Street partly because the Fed only turned the tap on to offset the headwind of fiscal austerity,” he explains. “If the US government is about to enter an era of fiscal deadlock, this is likely to turn the final act in the Ice Age into a far bigger deflationary bust than I have been expecting.”
....MORE
