The grand experiment to save the US economy has completed its first phase. It has been more than six years and $3 trillion dollars later… Quantitative Easing (QE) is over; long live QE3.
The Federal Reserve balance sheet muddled about $800 billion dollars before the bank crisis, which now stands near $4.5 trillion. Of course, it will be debated for years to come whether anything was done with these extraordinary measures, or what it did for this nation.
A few years earlier, they saved banks and allowed government spending to climb to unthinkable levels.
Let the guessing games begin. With this phase of accommodation coming to a close, when will the Fed hike interest rates? Some of the key language point to “solid gains” in labor and inflation, and then the Fed “running below” their objective. However, some feel the Fed opened the door to a hike sooner rather than later.
I am convinced that it will be September or December of next year with extraordinary data, perhaps forcing the issue. Let's face it, the United States economy was laid out to be resilient and tough, but it is nowhere near firing on all cylinders.
I suspect earnings and data like the GDP will determine where the market goes until next Tuesday (midterm elections) and Friday (jobs report).
After the Bell
Visa (V) posted its financial results after the bell. Perhaps, the Fed's handiwork is having an impact as Americans used credit at a much faster pace than debit. Debit has been the top form of plastic since 2007, just as the nation was barreling into the Great Recession.
| United StatesPayment Volume Billion USD | Credit | Change | Debit | Change |
| $327 | +12.7% | $429 | +6.7% |
The world has picked up the plastic habit, although none uses it nearly as often as Americans do for payments, but rather transactions.
| Credit & DebitVolume | VolumeBillion $ | Change |
| Asia Pacific | $505 | +8.8% |
| Canada | $66 | +6.8% |
| CEMEA | $280 | +14.8% |
| LAC | $276 | +12.2% |
| US | $755 | +9.2% |
| Total | $1,882 | +10.2% |
| Payment Transactions | Total |
| Asia Pacific | 3,821 |
| Canada | 627 |
| CEMEA | 1,389 |
| LAC | 2,408 |
| US | 12,221 |
| Total | 20,465 |
Americans who use credit cards are an important component of Fed policy, but it is about big-ticket items, namely homes, that anchor the economy. Cheap money means nothing, but soon, mortgages with 3% down may shift the tide... It's a dangerous path, but when more than $3.0 trillion was added to the Fed's balance sheet, caution was thrown to the wind a long time ago.
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