QE3 looks like a desperate act to feed money to large banks, offload MBS toxic waste from their balance sheets, devalue the dollar against houses, commodities, and other currencies and create significant collateral damage in the form of consumer price inflation according to a number of respected economists and critical thinkers on the subject of QE3. [Let’s take a look at what they have to say.] Words: 1661
So says GE Christenson (www.deviantinvestor.com) in edited excerpts from his original article* entitled We Have Been Warned! – Part 2.
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Peter Schiff called the housing bubble when almost everyone thought he was an extremist and utterly wrong. History has proven he was correct then, and I believe he is correct now. He stated:
“In the meantime, the implications for American investors should be clear. The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won’t turn off the spigots even if things noticeably improve. In other words, the dollar is screwed.”
Daniel Amerman wrote regarding Bernanke, QE3, and the effort to devalue the dollar:
“This building crisis of a strengthening dollar and rising unemployment called for emergency action, and that is exactly what Bernanke is doing. He is effectively calling in a B-52 strike on the US dollar, monetizing for the world to see, and pledging to monetize for as long as it takes – until the US dollar is driven down to a level where American workers can once again be globally competitive.”
Peter Schiff also wrote on Bernanke, QE3, and the necessity for a poor memory in the economics profession:
“Instead he explained how the new stimulus would be focused directly at the housing market through purchases of mortgage backed securities. He made clear that this strategy is intended to spark a surge in home prices that will in turn pull up the broader economy. Such a belief requires a dangerous amnesia to the events of the last decade. Despite the calamity that followed the bursting of our last housing bubble, economists feel this to be a wise strategy, proving that a poor memory is a prerequisite for the profession.”
Steve Saville wrote regarding the Fed, QE3, and the potential for more QE in addition to the QE3 already promised:
“So, the Fed has done what we thought it would have enough sense not to do at this time. The US now has “QE3″. The Fed has said it will purchase $40B per month of mortgage-backed securities, indefinitely. This is being done to ‘put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.’ Interest rates are at generational lows, but the Fed believes that what the US economy really needs right now are lower interest rates…. The bottom line is that when this latest program doesn’t achieve the intended results, it won’t be perceived by the Fed as a failure of ‘monetary accommodation’. It will, instead, be perceived as a failure due to insufficient monetary accommodation and therefore as a reason for an even higher dose of the same bogus remedy. This process is likely to continue until price inflation is widely perceived as a major problem.” (Fed Up)
Charles Hugh Smith questioned the morality of QE3 and explored the real reason for QE3. He wrote:
“Once again we can start by asking why a nation’s Central Bank should buy mortgages from private financial institutions. Once again the first answer is a variation on the same theme: the Central Bank prints money and buys the mortgages as a way of socializing private losses and passing through billions of dollars in “free money” to private hands… Since the Fed can create unlimited money, why not pay off every mortgage in the land? That’s only $9.7 trillion, and if the Fed wanted to unleash an orgy of spending, that would certainly do it. Trillions in losses would be filled with “free money,” since the Fed would pay the full value of all mortgages.
This thought experiment reveals the real agenda of the Fed’s asset purchases: it’s not about aiding the nation or borrowers, it’s all about funneling “free money” to the banks to restore their balance sheets and profits.”
Peter Schiff further discussed QE3 and likened it to a runaway train rushing toward a brick wall. He concluded:
“Bernanke and his Wall Street supporters see cheap money until the horizon – but that horizon is really a painted brick wall. So it’s not QE-Infinity, it’s QE until the Fed either recognizes the brick wall and slams on the brakes, or doesn’t and crashes into it. Either way, the only way to get off this locomotive is to invest in hard assets.” (Peter Schiff: QEternity Has Its Limits – Here’s Why)
William (Bill) H. Gross founded PIMCO, a huge bond investment fund that manages over $1 Trillion in assets and highly respected in the financial community, wrote in his October 2012 commentary that:
He is afraid (my words) for the structure and integrity of the economy and the financial markets of the United States. He further stated that the United States is an addict “who frequently pleasures itself with budgetary crystal meth.” He is not optimistic about current monetary and fiscal policies and even advised purchasing gold as an alternative to bonds, the investment business that made him wealthy.
Steve Saville wrote further about bad economic theory in the form of QE3 and discussed the basic nature of the Fed. He said:
“We’ve speculated in TSI commentaries that unwavering devotion to bad economic theory (a type of stupidity) is the most likely reason for the Fed’s introduction of a new inflation program at this time. There are other plausible explanations, but in general terms it boils down to this: the Fed is either stupid, or evil, or stupid and evil. There is no fourth possibility that makes any sense. It is either evil enough to inflate the currency in an effort to help banks (or the re-election chances of Obama) even though it knows that doing so will harm the overall economy; or it is stupid enough to believe that the economy can be helped by creating money out of nothing and distorting the price signals upon which an efficient market relies; or it is evil enough and stupid enough to believe that it can transfer wealth to the banks and simultaneously create a net benefit for the overall economy. We’ll go with evil and stupid.”
Congressman Ron Paul discussed the consequences of Fed actions months before QE3 was announced and stated that expanding the money supply is the root cause of inflation: He stated:
“The American public now senses that the Fed’s actions, especially since 2008, are enormously inflationary and will cause great harm to the American economy in the long run. They are beginning to understand what so many economists still don’t understand, which is that inflation is a monetary phenomenon, and rising prices are merely a symptom of that phenomenon. Prices eventually rise when the supply of US dollars (paper or electronic) grows faster than the available goods and services being chased by those dollars.…The true evil of inflation is that newly created money benefits politically favored financial interests, especially banks, on the front end. Over time, however, the net result of monetary inflation is always the devaluation of savings and purchasing power. This devaluation discourages saving, which is the key to capital accumulation and investment in a healthy economy. Inflation also tends to hurt seniors and those living on fixed incomes the most.”
Deepcaster wrote regarding QE3 and how it would weaken the purchasing power of the dollar and hurt the middle class and their standard of living. He stated:
“This debauchery of the $US weakens its purchasing power and thus increases burdens on the agonized disappearing middle class.
The Bernanke claim that buying $40 billion per month in mortgage backed securities would stimulate the economy and help the housing market is just a fictitious cover story. In fact, it is just another gift to the Mega-Banks who hold underwater paper, and to Wall Street which proceeded to rally on a Fed-sugared high. And, of course, it is a pre-election gift to President Obama. Important Consequences will ensue.”
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We have been warned! QE3 is now pumping newly created dollars into the large banks.
- Expect the US money supply to dramatically increase as a consequence of QE3 and yet-to-be announced additional stimulus (printing money – injecting liquidity into the financial system).
- Expect increased consumer price inflation and a declining standard of living for the middle class of the United States. The banks will benefit, but many others will suffer.
- An economic recession seems inevitable, another financial crash seems likely, and the social unrest we see in Greece, Spain, and Italy may visit the United States as soon as the next congressional election.
- The government will “do something,” and it will not help the middle class! Perhaps QE4 on steroids will be next.
Read the first article in this series for additional information on the inevitability of more “money printing” and its effects: “We Have Been Warned!”
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There is still time to buy gold and silver to protect your assets before the dollar declines further….With QE3 officially announced and huge US government budget deficits projected for the foreseeable future, the long-term uptrend in gold and silver, for at least several more years, is now assured so there is still time to buy gold and silver [Read: QE3: Impact on Gold & Silver Returns Should Outshine Impact on Economic Growth – Here’s Why].
We have been warned!
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
With the pop from the USFed’s latest attempt at financial shock and awe already seeping from lackluster markets, and the teleprompter news networks losing steam over their promotion of the same, it is time to take a look back at the decisions made on 9/13/2012 and set the record straight on some things.
The latest round of quantitative easing (an additional $40 billion a month until conditions improve) has been dubbed as “QEternity” or “QE-Infinity” by its critics but it will end much before that. We are witnessing a massive bubble in US government debt, and we’ve reached the point where no one in charge believes it will ever end – an excellent contra-indicator. [Let me explain.] Words: 720
The Fed professes that QE 3 or as I call it, QE Infinity (QEI), will create jobs but I am not sure how they can expect anybody to buy their rationale. As we know, QE 1 and QE 2 did very little in the way of creating jobs. Might the Fed realize that QE Infinity could actually be counter-productive to economic growth?
While the Fed’s third round of quantitative easing is fairly aggressive it is unlikely to have a significant impact on the economy – especially if policymakers in Washington lead us over the fiscal cliff. Where QE3 may have an impact, however, is in the commodities market, and in particular gold. Here’s why. Words: 400
Evidence shows that the U.S. money supply trend is in the early stages of hyperbolic growth coupled with a similar move in the price of gold. All sign point to a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation, followed by a rise in nominal interest rates that will bring a sovereign debt crisis for the U. S. dollar with it as the cost of borrowing for the government escalates…[Let me show you the evidence.] Words: 660
Daniel Thornton, an economist at the Federal Reserve Bank of St. Louis, argues that the Fed’s policy of providing liquidity has “enormous potential to increase the money supply,” resulting in what The Wall Street Journal’s Real Time Economics blog calls “an inflation inferno.” [Personally,] I think it’s too soon to make significant changes to a portfolio based on inflation fears. Here’s why. Words: 550
The developed economies of the world have opened the money spigots…[and this] massive money and credit creation is sitting in the banking system like dry tinder just waiting for a spark to set it ablaze. How quickly it happens is anyone’s guess, but once it does we are likely to be enveloped in a worldwide inflation unlike anything before ever witnessed. [Let me explain further.] Words: 625
With the U.S. election just weeks off, political pressures will mount to favor fiscal stimulus measures instead of restraint. Such action can only accelerate higher domestic inflation and intensified dollar debasement culminating in a Great Collapse – a hyperinflationary great depression – by 2014. [Let me explain why that is the inevitable outcome.] Words: 2766
The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833
The outcome of the election of 2012 will [only] determine the rate of speed at which we approach the [financial] cliff [because] neither political alternative is willing to change course, to steer away from the cliff. The cliff is so high that whether we go over it at 200 mph (Obama) or whether we merely slip over the edge (Romney), the end result is the same — fatal for the economy and perhaps our entire political system. It is the fall that will kill us. [This article explains why that is going to be the case.] Words: 1135