Tuesday, October 16, 2012

Discussion Topic 10/15/12 (Mon)

Topic:  Will QE3 Cause Serious Inflation? Other impact on US economy?

Our view on the topic:
Kalyan: Look forward to hearing thoughts on the following:

(1) Effect of underutilized production capacity and dismal immediate economic prospects on inflation.
(2) Relative impact of fiscal stimulus vs. monetary policy (where does bank liquidity fall into this?).
(3) Current state and future of real estate market; impact on lending.
(4) Lower interest rates, exchange-rate weakening, and domestic economic benefits (more import/export?) and possible risks.
(5) Risk of commodity boom and firm investment in fixed capital as opposed to human capital.

Tian: My three cents on QE3:

1) Inflation rate is low, a good timing for QE3,
2) Credibility of US dollar won't be in the near future due to even weaker Euro and Japanese yen,
3) May recover real estate market, then stimulate other industries.

1) May not help lower employment and export deficit.
2) How to regulate to avoid putting too much money into virtue economy, and I think US. needs bringing back manufacturing to its territory.

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