Thursday, November 11, 2010

Irrational exhuberance

After the US Federal Reserve announced QE2 (i.e., its intention to print more money), equity markets around the world jumped with hope. This optimistic reception has me baffled.

Since the past few months, there has been a lot of hand-wringing about corporations having loads of money, but not the confidence to hire or spend. I googled "sitting on cash" and the result offers a good idea of this phenomenon. There also seems to be evidence that households are cutting back on spending the money they already have, thanks to the feeling of insecurity. Home sales are still falling in spite of record-low interest rates.

It appears the American economy has the cash, but not the confidence. How is pumping more money going to help?

On the side: I also googled "cash rich", and came across this snippet. Country singer John Rich and his wife had a son earlier this year. They named him Cash. Cash Rich.

Links to this post:

Create a Link

<< Home

free html hit counter