QE programs not only help to juice markets higher through dollar devaluation, they expand the Federal Reserve’s balance sheet to record breaking levels. The central bank’s balance sheet is already nearing $3 trillion and is now on pace to hit almost $4 trillion by the end of 2013 with the recently launched QE4. Francisco Blanch, a global investment strategist with Bank of America, believes the Federal Reserve will maintain bond purchases until the end of 2014, a move that could send the central bank’s balance sheet skyrocketing to $5 trillion.
Bill Gross, founder and co-chief investment officer of PIMCO, estimates that the economy will need to add roughly 200,000 jobs per month for the next 4-5 years in order to meet the Fed’s unemployment target. In other words, interest rates are not planned to rise anytime soon. However, he also says that believing the central bank can keep control of interest rates at current levels is a “decent stretch.” Furthermore, it should be noted that the Fed only pegged interest rates to the unemployment rate.
Investor Insight: True Safe Havens Needed as Fed Monetizes Uncle Sam
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