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The Fed’s new bond buying program is unlikely to do much, if anything, to help the job market. The issue is not liquidity in the system. US corporations have $3.6 trillion sitting relatively idle. Private equity funds and private investors have plenty of cash to invest. Individual balance sheets, while still a long way from properly balanced, are far better than they were in 2008. The issue is unprecedented uncertainty, fear, Obamacare burdens, and the regulatory threat that once you own an employee you may have a very hard time getting rid of him, and the whole issue of tax reform and increases and the fiscal cliff. Nothing the Fed does can alter that fear. It is a set of policy issues on the fiscal and executive side, and floods of even more cash is only setting us up for the possibility of inflation and crowding out of private capital raising in a few years when the Fed has to sell this portfolio.

While the Fed says it will hold rates at near zero until 2015, that seems a pretty risky projection. Nobody really knows what the next three years will bring. Much depends on who is president and who controls Congress. If Romney is elected with control of Congress, then a lot of things will change. Federal spending will be cut and hopefully there will be a complete reform of the tax code. There is likely to be a view by investors and business that things will be much better and it is likely that the markets will rally and business might start to hire by late 2013 if they see policies implemented that deal with the issues of entitlements and taxes. None of that is certain.

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