17 Sep QE3 And Super Mario
No it’s not a new Nintendo game – but merely the latest instalment in high flying world finance.
Super Mario is Mario Draghi the governor of the European Central Bank (ECB). Over the summer, Super Mario told the world that he would do “whatever it takes” to save the euro. Recently what that actually means in practice finally became clear: The ECB’s governing council agreed on a plan to buy the sovereign bonds of troubled eurozone nations that are under attack in financial markets.
Any European nation that wants the ECB’s active help must agree to a range of tough policy measures and must follow through on them. The International Monetary Fund will be brought in, alongside European authorities, to tailor the package to the nation specifically.
On top of this last week in the USA, Federal Reserve (The Fed) Chairman Ben Bernanke announced what is known as Quantitative Easing Part 3 (QE3) – this means the Fed will buy $40 billion per month of bonds & fixed interest securities in the market place. This will release a wave of further cash into the US financial system. And in an unexpected move, the Fed left the program open-ended and said it was prepared to do even more “if the outlook for the labor market does not improve substantially.”
All these moves are designed to stimulate economic activity and to shore up liquidity in financial markets. What is of more interest is however signs of recovery in the US Housing market. The over building & rampant financing of NINJA (No Income No Jobs or Assets ) loans fulled the boom in US Housing and then created the massive bust as we know it called the GFC.
Recently there have been encouraging home sales. California’s (the worlds 8th largest individual economy in it’s own right) housing market showed strength in August with sales posting their best showing for that month in six years and prices holding steady. Sales rose 4.5% from July and 9.4% from August 2011 to total 41,280, real estate firm DataQuick reported. Although still below the historical average for the month, it was the best performance for an August since 2006.
The median home price for California was $281,000, the same as in July and up 14.1% from August 2011. It was the sixth consecutive month that the median rose year-over-year. The median — the point at which half the homes in the state sold for more and half for less — has climbed 27% from its lowest point, reached in April 2009.
So watch this space could be the watchword here. If the housing market continues to recover in the USA this could have a bigger economic effect than what Super Mario & Barnstorming Ben can do themselves