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  • Is the Fed Now Leaning Toward QE3?

    Since late last year, the consensus has been that the Fed will not enact more quantitative easing, or QE3, since the economy is slowly improving. Yet there is new evidence which suggests that the Fed may yet implement QE3, despite the fact that QE is unpopular politically. If this is the case, and no one knows for sure, I would expect the Fed to announce QE3 no later than this summer and maybe even sooner. They don't want to do something unpopular during the election season in the last half of this year.

    Following that discussion, we turn to Europe and the fact that the European Central Bank has now made over $3 trillion in bailout loans to banks across the region. That tops even our own Fed which has $2.9 trillion on its balance sheet! Greece has reportedly completed its huge bond swap in which investors took a haircut of 70%. In return, it appears that Greece will get its much needed second bailout loan of 130 billion euros. While Greece may be off the front pages for now, it won’t be for long.

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  • Fed Offers Bailout of European Banks

    Last Thursday we learned that the US Federal Reserve has decided to make unlimited US dollar loans (swaps) to the European Central Bank (ECB) and directly to European money center banks that are in trouble, at least through the end of this year. And what will the Fed get in return as collateral? Eurodollars that are quickly falling in value as of late. So even as our own economy may be falling back into recession, the Fed sees fit to bail out the European banks that are sinking in sovereign debt from the likes of Greece, Ireland and Portugal.

    All eyes are on tomorrow's Fed Open Market Committee policy statement. The Fed is expected to announce its so-called "Operation Twist" strategy that is intended to lower medium and long-term interest rates, which may or may not work. Some people expect the Fed to comment on its latest decision to make unlimited US dollar loans to European banks, but I will be very surprised if they mention a word about it. They're keeping it very quiet (which is another good reason to read my E-Letters and blog postings).

    Speaking of blog postings, I will write about tomorrow's Fed policy decision on my blog before the end of the day tomorrow. Go to www.GaryDHalbert.com and subscribe to read my take on the Fed's announcement.

    Following the Fed discussion, I will bring you the highlights of the latest report on US poverty from the Census Bureau. Poverty is now at an all-time high. Ditto for the number of Americans that depend on food stamps, according to the Department of Agriculture. These two reports are very troubling.

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  • European Debt Crisis Revisited - Implications For the US

    Today we take a fresh look at the European debt crisis which is worsening. Just over a month ago, EU leaders agreed on a second bailout loan for Greece to keep it from defaulting. That bailout loan had to be approved by all EU member nations, and several have refused to do so unless Greece can put up collateral. This has caused the bailout agreement to unravel and Germany's Chancellor Andrea Merkel is frantically trying to put it back together. If she fails, we could get another serious shock to the equity markets in the US.

    Meanwhile, the European Central Bank began buying huge chunks of government bonds from Italy and Spain to keep their credit markets functioning. Some argue that the ECB is not authorized to make such purchases but it is doing so anyway. It remains to be seen just how long the ECB can continue this large-scale quantitative easing. In any event, the European debt crisis is worsening, and I continue to believe that it will have more negative consequences for our markets here.

    A new CNN poll found that Americans' confidence in Congress is at a new low. For the first time ever, a majority of Americans want the bums in Washington voted out of office -- including their own Representatives in Congress. In past polls a majority wanted some members of Congress kicked out, but not their own Representatives. You'll find this story very interesting. Finally, I leave you today with a very good article written by Tony Blankley who offers President Obama some advice for his major speech on Thursday night.

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