QE 3 is Coming… It’s Just a Matter of What Form It Will Take

Phoenix Capital Research's picture

The Fed will
absolutely have to engage in some kind of QE. It might be a toned down version
like QE lite (which supposedly doesn’t involve additional money printing). Or
the Fed might try to make it a QE that would be more palatable to homeowners (targeting
mortgage rates or some such thing).


However, the
fact remains that the Fed HAS to continue with QE of some kind. The reasons for
this are:


1)   The
$180+ TRILLION interest rate based derivatives market (90+% all of which are
owned by the TBTFs)

2)   The
debt implosion a spike in interest rates would have

3)   Having
become the primary buyer of US debt,
the Fed must continue to buy or risk a debt collapse in the Treasury market


Whether or
not you like QE (yes, there are some insane people who think it’s a good idea…
unfortunately they work for the Fed), this is the reality our financial system


Indeed, if
the Fed were to quit QE for good the resulting crisis would make 2008 look like
a picnic (the 2008 collapse was triggered by the CDS market which was only
$50-60 trillion in size, les than one third of the interest rate based
derivatives market).


So more QE
is on the way. Which ultimately will result in the US Dollar collapsing. In
fact, the only reason the Dollar hasn’t collapsed already is because it’s
priced against a basket of similarly flawed currencies.


In other
words, we’re pricing junk (the Dollar) with other junk.


The whole
point of all of this is that inflation is coming in a BIG way. What we’ve seen
so far is nothing compared to what’s going to hit once the US Dollar breaks to
new all-time lows (at the pace we’re going this will hit within two months).


So if you’ve
yet to take steps to prepare your portfolio for the coming inflationary
disaster, our FREE Special Report, The
Inflationary Disaster
explains not only why inflation is here now, why the
Fed is powerless to stop it, and three investments that absolutely EXPLODE as a
result of this.


All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.


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and click on FREE REPORTS.











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Future Jim's picture

According to this article, http://www.telegraph.co.uk/finance/markets/8466825/Fear-and-greed-index-at-lowest-since-financial-crisis.html, the VIX, the current premium for puts, and the CS Fear Barometer Index indicate we are days from a top.

Now consider what would happen if Bernanke announced that QE would permanently end soon.

It would be the perfect storm. Stocks and PMs would plummet.

Therefore, that is exactly what will happen, and then of course Bernanke will announce QE3 and stocks and PMs will spike and reach a new peak.

What I would like to know is where the bottom will be in this sharp V. It will only last for a moment.

chunkylover42's picture

An additional way to play the VIX is by simply using call options on the index itself.  Buy some cheap OTM calls with a 6-month expiration and trade the option.  You get the added benefit of leverage in the process and you can make far more on a % basis compared to equities.

web bot's picture

Dudley is seeking the ability to pay interest on bank reserves. Looking at commodity gains, he better plan on paying double digit interest because their pidly interest will not be enough to entice money to sit on deposit at the Fed.

Future Jim's picture

oops. replied to the wrong post.

MarketFox's picture

Deflation is coming in a big big way....

One upon a time there was 5x credit and 1x cash in a box....


Then....suddenly the 5x credit was reduced to 2x and cash was reduced to .3x....


So the total $ available fell from 6x to 2.3x....


So tell me....how can inflation happen.....




Here's another one....


The name of the game....is to get significant $ in the paper of the day....


It makes absolutely no difference about the label...just another market to be fleeced by the house....

nathan1234's picture

Oh Yes- Deflation !!!

And so who would have money to lend to the Fed?

Future Jim's picture


The Treasury sells bonds and the Federal Reserve buys them - currently 70% of them. It's called Quantitative Easing. It started recently, and it has no upper limit as far as I can tell. Hence hyperinflation is possible through Quantitative Easing.

tomster0126's picture

hyperinflation really is our new reality, huh?  can you imagine, a starbucks coffe costing 100 dollars?  QE is not the solution...



Zodiac's picture

Yes I can imagine starbucks coffee at $100.  Who is going to buy U.S. issued junk bonds to fund nearly $1 TRILLION per year deficits (which are forecast to be down from the current $1.6 trillion, yeah, right like this is going to happen) infinitely into the future, plus off balance sheet Social Security and Medicaire obligations plus wars?  Only the borrower of last resort - the Fed.

Future Jim's picture


MarketFox's picture

Deflation is coming in a big big way....

One upon a time there was 5x credit and 1x cash in a box....


Then....suddenly the 5x credit was reduced to 2x and cash was reduced to .3x....


So the total $ available fell from 6x to 2.3x....


So tell me....how can inflation happen.....




Here's another one....


The name of the game....is to get significant $ in the paper of the day....


It makes absolutely no difference about the label...just another market to be fleeced by the house....

VENOM650R's picture

Total BULL SHIT. There will be NO QE3 and NO hyper inflation. There will be a GREAT deflationary debt DEPRESSION. Get a clue!

malek's picture

Another one who doesn't get it, if you state "They gonna do a deflation depression" you actually believe we will have a (planned, orderly) return to sound money.
Good luck with that hope! You will dearly need it.


Twindrives's picture

Methman stole another car.

Yen Cross's picture

Can you say OFF shore? Give the CFTC a call and I'll send you some (Bernanke Thugnum) It's  a really strong Opiate!  I like Citi @ par 1.00. SOVEREIGN! HAPPY BITCH?

Yen Cross's picture

China (PBOC holds 3T in USD denominated securities,cash T-bills)I have spent a considerable amount of time analyzing the posts on this site. They all have merit!

  I specialize in FX trading. If PBOC unloads Treasuries, That is a USD(dollar) purchase short term. Yields and interest rates will rise substantially. There will be short term demand for USD via the carry, until PBOC decides how to diversify! Some want to call it FIAT! I call it soverign debt!

  The PBOC would wipe out any benefit of (massive) Treasury liquidation. The byproduct would be commodity price expansion! The Dollar will strengthen in FX markets VIA carry trade (interest rates on carry), and the Fed won't be paying interest on the(repatriated)T- notes. Yuan will shoot through the ROOF. That will calm PBOC internal term-oil (pun intended). 

   Selling a Treasury, is Buying back a dollar! Don't put the cart in front of the horse!

China selling USD in massive amounts is nothing more than posturing! The export market will die, and their Piranha neighbors will eat them for lunch!



disabledvet's picture

so cash is king provided it's the greenback in the USA and you have the job and excess cash flow to buy anything.  unfortunately "all the people with all the free cash flow are putting it into the stock market" and maybe even a commodity or two as well.  how this helps the deficit at all is just beyond all sense (although not beyond all NONSENSE of course!)--dare i even begin on the subject of "banking"--but we'll leave that for another reality.  Anywho i see you're struggling with spelling with sovereign, too.  How about we just call it gold and be done with it since anyone can claim they believe in free market capitalism but not acknowledging that gold is money in said context gets an error message.  period.

lawton's picture

Wouldn't collapsing stock and commodity values drive people into treasuries so the rates wouldn't have to go up that much to get people there ? Kind of what happened in Japan with their stagnant stock market ?

disabledvet's picture

absolutely.  "we're suppose to be Japan."  But not to point out the obvious "we are not."  At ANY level.  Of course it is THOUGHT that "the ability of the Fed to destroy the equity market is without question."  But with trillion dollar deficits where to begin?  Forget QE or no QE and simply ask the question "can they ever raise ANY interest rate at ANY level EVER?"  I say no and look forward to being proven wrong.  And you will not hear from me how "I'm a conservative and I LOVE inflation" either.

Vic Mackey's picture


I hear very often that QE will continue due to the "The $180+ TRILLION interest rate based derivatives market". Forgive my ignorance but why is this is so? Are an oversized portion of the bets predicated on an assumption of continued ZIRP? Thanks..


Rainman's picture

Exactly....pricing junk with other junk nails it. How can a collection of humanoids miss a debt projection by $ 10 Trillion fiatscos ?? Only the non-partisan CBO, of course. QE,  meet infinity.



Buck Johnson's picture

And remember, the CDS bailout wasn't a bailout.  It was shifting much of it to the govt. and/or to the mark to make believe issue.  So if they stop not only with the CDS be a problem but also the derivatives. 

Racer's picture

I would really like to thank ZH, vegetables and food growing needs time .. I have put in place my own extremely less dependent  on greedy corporations for food sources outputs than I have ever done before. I am already cutting down my food and energy bill considerably... by a massive amount.

thank you ZH for being such a brilliant site


BTW ... added benefit... it is sooooo much better than the junk/bland(any other adjective for pathetic) foods they sell at massive markups compared to farmers received prices




Popo's picture

Another short, useless post from "Phoenix Capital Research" which has almost zero substance. Where's the "research"?

This is little more than an advertisement. Many readers write more informative *comments* than these silly little-posts which add nothing to the community.


Go away Graham.


And here's why QE3 can't happen:


PY-129-20's picture

So, how long can you survive, if you pay 9,99 Euro per litre Super fuel? People paid 209 Euro for 21 litre (304,70 Dollar / 21 litre Super fuel).

14,56 Dollar per litre? That's more than 40 Dollar per US-Gallon...There are rumors in the MSM that the entire system will break down, because people refuse to buy Ethanol based E10...


disabledvet's picture

i was told Greece was supposed to have defaulted today.  no?