Good Monetary Policy Can't Overcome Bad Fiscal Policy
Posted at 1:30 p.m. on Nov. 15, 2012
Cullen Roche notes that market concerns stemming from the “fiscal cliff” have completely outweighed the market benefits from the Federal Reserve’s most recent quantitative easing program.
“What we’ve seen since the election results proves that the market is far less concerned with monetary policy than it is with fiscal policy. After all, Obama was the pro-monetary policy, pro-QE3 candidate as Romney made it clear he disapproved of the Fed’s actions. But the re-election of President Obama resulted in about 6 hours of euphoria over the certainty of continued Fed policy. And as soon as the market realized that fiscal policy was at risk of being tightened the market panicked and has sold off over 4% since the election and 8% since the FOMC’s QE3 announcement.”
“Fiscal policy in a balance sheet recession is far more impactful than monetary policy….It’s time we all realize it. More importantly, it’s imperative that the politicians in Washington realize it and take the necessary steps to stop playing political chicken with the US economy.”