The downside of QE3

By Wire services | September 17, 2012 | Last updated on September 17, 2012
1 min read

The Federal Reserve’s latest attempt to aid the U.S. economy has hit a roadblock.

Financial Times reports banks are struggling to process mortgage applications, which are keeping rates on home loans elevated despite the recent stimulus.

Read: Canadians split on mortgage choices and Beware when clients co-sign mortgages

An anonymous leading lender told FT, “[QE3] has virtually no transfer mechanism whatsoever to the customer in the near term, since originators are massively backlogged in terms of origination volumes.” Read more.

Further, The Globe and Mail warns U.S. easing measures aren’t always good for all markets worldwide.

While QE3 may be boosting global, emerging markets today, it suggests any positive effects will only last for a short period. The flood of money promised every month may start to scare investors and vex international bankers.

Why? Unrestricted stimulus “opens the prospect of a limitless supply of hot money, driving the prices of risky assets ever higher.” Read more.

Also read:

Good news can dampen markets

QE will work this time

Will QE be effective?

QE3 still on the table

Fed leans toward further easing

QE3 will boost Canadian economy

Emerging markets bouncing back

Inflation is the enemy of fixed income

Wire services