Sorry Bulls, The Fed Will Not Engage in More QE

Phoenix Capital Research's picture



For well over a year now, I’ve been stating that the Fed will not be able to engage in Quantitative Easing (QE) unless systemic risk hits (think another 2008). My reasons for this are as follows.


First off, the political consequences of hitting “print” (inflation) have made themselves evident to everyone. Indeed, Bernanke was talking about this point as far back as May 2011. The below quote is from a Q&A session with Bernanke during that month.


Q. Since both housing and unemployment have not recovered sufficiently, why are you not instantly embarking on QE3? — Michael A. Kamperman, Waco, Tex.


Mr. Bernanke: “Going forward, we’ll have to continue to make judgments about whether additional steps are warranted, but as we do so, we have to keep in mind that we do have a dual mandate, that we do have to worry about both the rate of growth but also the inflation rate…


The trade-offs are getting — are getting less attractive at this point. Inflation has gotten higher. Inflation expectations are a bit higher. It’s not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we’re going to have success in creating a long-run, sustainable recovery with lots of job growth, we’ve got to keep inflation under control. So we’ve got to look at both of those — both parts of the mandate as we — as we choose policy”


The significance of Bernanke’s admission went largely unnoticed by the financial media. How many times has CNBC and Bloomberg and the like put on various “gurus” who guarantee that QE 3 is just around the corner?


Yet, here we are one year and over 10 Fed FOMC meetings later and the Fed hasn’t launched any new QE programs. Think about that. For over a year now the financial media has been awash with “experts” saying “QE is just around the corner, the Fed will launch QE any minute now, etc” Every time stocks rally. But. No. QE.


Instead the Fed has largely resorted to simply shuffling its portfolio around (Operation Twist 2) or issuing verbal/symbolic interventions e.g. promising to maintain ZIRP for a prolonged period.


Heck, the Fed has even admitted it doesn’t want to engage in more QE. Just this morning the NY Fed released a study revealing that the Fed has managed to double the value of the S&P 500 just by holding regular FOMC meetings.



As the above chart shows, when you remove for the market moves that took place around Fed FOMC meetings, the S&P 500 would be around 600 today.


Thus, I ask… why bother implementing QE when you can get the same effect (higher stock prices) simply by issuing verbal interventions?


We get more evidence that the Fed doesn’t want to engage in more QE from the fact that the Fed has clearly gone into damage control mode. Bernanke has staged townhall meetings, opened the Fed to Q&A sessions, and even had his favorite Wall Street Journal reporter (Jun Hilsenrath) pen articles depicting him (Bernanke) as an average guy who drives a Sebring and reads a Kindle.


Remember, we’re talking about a man who openly lied to Congress (Bernanke’s famous “I won’t monetize the debt” statement) … a man who basically told reporters to get stuffed regarding the Fed’s secret loans during the 2008 Crisis… now staging townhall meetings with the public. If that doesn’t tell you that the Fed is feeling some major political heat, nothing will.


So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called Surviving a Crisis Four Times Worse Than 2008 and it’s chock full of information on how to not only survive but thrive during if this particular black swan (or any of the others lurking in the system) comes to pass.


This report is 100% FREE. You can pick up a copy today at: under the OUR FREE REPORTS tab.


Good Investing!


Graham Summers


PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.


And ALL of this is available for FREE under the OUR FREE REPORTS tab at:

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nathan1234's picture

QE is not going to solve anything.

I agree with Graham. If you have read the POTEZ you may possibly understand that we are nearing the collapse.

This debt problem can never be solved. And what people think is wealth- the Printed IOU's called money is actually a liability of the Government.

The real wealth lies elsewhere and has already been acquired using this fools gold called fiat currency.


jimod's picture

Primarily or secondarily Guerilla marketing? He gives us the puzzle of no QE3 and sells us the answer. Like sin and salvation?

Snakeeyes's picture

Not with M2 Money Velocity at post WWII lows. It won't penerate through to the economy. Unless Obama seizes banks and forces them to lend.

Stuck on Zero's picture

If it's not called QE now then what do they call it when the Fed injects trillions into the economy via the purchase of Treasuries?


Zola's picture

@engineer - your plan means converting the debt into M0 the monetary base through the printing press of unbacked dollars. Currently M0 is around 2 trillion USD and the debt is around 15 trillion. You are basically advocting for the base to be multiplied 7x. I can only imagine what inflationary effect that would have. 

Alternative is to revalue the Gold reserves to a multiple of the national debt to be able to pay it off by selling some gold. That would also be potentially inflationnary.

mind_imminst's picture

Of course the FED will print digital fiats until the CPUs meltdown. I can't believe that Graham is trying to convince people that no more QE is coming. Of course another "2008" event is coming. Of course the FED will print. THAT IS ALL THEY DO. I think they (the CBs) will try to remain as stealthy as possible about it for as long as they can, so not too many people besides the TBTF banks can front-run the QE-to-infinity, but they will print. It is fait accompli.

The They's picture

i love how everyone gave this article a 1 star rating. Personally i think the Fed wants to engage in QEIII but are afraid of doing so before the election for fear of seeming "political".

Meesohaawnee's picture

they are engaging in qe. its just under a differnent name. They have provent from Oct/11 till present that the same endless ramps to funnel money from the middle class to hedgies and corp insiders still is going on. There is QE its just more stealthy.

Bazinga's picture

Graham closes with "Good Investing!" That is HEEEEL-Arious!

dumpster's picture

graham a double bull shit .. head extended up the orafice

vmromk's picture

Hey Graham, I got news for you.....the Fed is already engaging in more QE except that they are not coming out and publicly admitting it.

You think Treasurys keep going up in price because buyers are flocking to safety ?

I think your analysis and service are both bullshit.

theTribster's picture

I don't agree, I think more QE is on the way as well as many others. It requires that the markets goes down substantially and unemployment continues at its current (or worse) pace. Likely both things will happen since we'll get no resolution from our politicians between now and the end of the year/beginning of next. This will drive the Fed to step in again on an even larger scale than previous QEs, he'll likely bring out a double barrel bazooka this time as anything less will too quickly dissipate as evertone knows.

In the end it is more likely to hurt than help, the help will only be temporary as the obvious indication is fundamental problems exist and are not being resolved - at all. Truly another band-aid solution to kick the can further hoping that the politicans will eventually figure it out before its too late and no amount of manipulation can help. We're pretty close now, end of August we should have some new European chaos to feast on as well as the looming fiscal cliff discussions - certain to drive the world's economies into another frenzy...

There is basically no chance of Washington getting anything done without a huge fight between the nitwits (pick your side) which will lead to uncertainty and ultimately a series of of bad solutions and decisions. Almost any politicians that survive the next election cycle are either in a state that manpulates voting records (most states for Senate I think) or they aren't running against anyone credible (translation=not enough money). Ron Paul is an exception and maybe a few others but not many, especially the leaders of both the House and the Senate should clearly be "voted out". Its comical to me that somebody like John McCain survives election after election and that's true for pretty much all of them, incompetent is an understatement when you look at what they have actually done during their tenure. 

Its so bad at this point that I can hardly listen to any of them talk for more than a minute or two, I'm immediately disgusted by the partisan attitude that supersedes the well-being of the country and allows them to focus on their own wallet - which they all do first and foremost. As I've said before, most of their actions over the last decades should be considered treason, and in many cases (Clinton, Bush and Obama) of the highest order. Punishment could be executed at Gitmo, a place close to all their little hearts! Little water-boarding action (apparently) never hurt anybody so let's engage in some!

Nostradamus's picture

Here is what Graham is missing.  The FED will engage in more quantitative easing if and when the stock market drops 15-20% from its April 1, 2012 high.  What are the chances of this happening?  I'd say 98% at least.  But the FED doesn't just engage in QE for fun, it does it when the stock market tanks. Remember, the FED is already highly accomodative with a < 0.25% FED funds rate as far as the eye can see. It may also do it if 10 year bond yields start to climb above 3.5%, but if that happens, I'd say the game is close to being over. 

SheepDog-One's picture

I dont believe that a bit, certainly not putting my money on it anyway. I think right when everyone is in total agreement about what theyll surely do next, theyll do the exact opposite.

silverserfer's picture

bring back the red seal! Fuck the FED!

Widowmaker's picture

On days like this I swear ZH is full of fucking idiots.


Savers looted, the elderly and poor eaten alive by Inflation Inc. = Mission Accomplished, Tools.


Lohn Jocke's picture

Ben is so scared of deflation, but he thinks that the problem with our economy is not enough AD... so we print more money because nothing gets people in the mood to spend more money than higher prices...

If he really wants AD to increase then he should just let prices drop.

Haole's picture

QE, by any moniker or method they choose, never stopped and will continue otherwise global economies will not only circle the bowl but get flushed.  Even a complete blue collar moron like me realizes this.   I suppose because there are no proclamations in the MSM of QE or impending QE that it is not happening?  C'mon!

SheepDog-One's picture

Watch as everyone is now 100% sure QE just continues on forever, the FED whipsaws everyone one morning with 'tightening'....Im going to so love that day!

Quinvarius's picture

That has the same probability as Obama deciding to nuke the USA.

SheepDog-One's picture

So then basically 100% assured?

BeetleBailey's picture

Don't give the commie douchebag Kenyan lying closeted homo race-baitin dividin of the nation any god damned ideas....

Nothing To See Here's picture

Literally. Tightening = technical US default.

Winston Churchill's picture

That plan was supposed to be secret.

Lohn Jocke's picture

So you're saying there's a chance...

PivotalTrades's picture

Do you mean literally or by continuing his socialistic policies. Either way we are doomed. The fact that he was elected once means its all over!

solgundy's picture

NO QE?.......WTF......." hello Eric, this is Barack...give Bennie a call an explain QE to him"

digitlman's picture

How'd that Greece EU exit prediction go, Graham?



cbxer55's picture

It'll happen eventually, just give it time. No one can be perfectly accurate on a prediction, look at Meredith Whitney and what she predicted. It happened, just at a later date then she predicted. She was right on the event happening, just not the time frame.

Same will happen here. Greece will eventually leave the EU, but after much more can-kicking. Heck, the entire EU is gonna eventually go Tango Uniform, wait for it! Nope, won't say when. But it's going to happen. They are frikkin broker than we are, and bailing each other out with money they borrow at a higher cost than the interest they are receiving. How long can that shit go on????

paint it red call it hell's picture

o'Bama will be left to swing in the wind without new dough, good riddance.

big ben clearing the way for heir elect romney with room still yet for a cheney incarnate, back room gubermint helm, neocon on the ticket.

God save us....

JPMorgan's picture

But the markets want their QE3 fix damn it.

It's like taking a babies milk bottle away.

If they don't get what they want they will throw their toys out of the pram and kick and scream all day and night.

Snakeeyes's picture

With M2 Money Velocity as lowest levels since World War II, it wouldn't do any good.

BUT the Fed is acting as Obama's re-election campaign organization, so don't discount the political aspects.

Quinvarius's picture

Yes it will.  I don't even like the idea.  I am just not blind enough to think the Fed will sit back and watch the banking system implode.  The debt will be monetized because the math says it has to be monetized.

cougar_w's picture

The effects of new QE have to hit before elections, like in late September, or it does the POTUS no good on election day.

I did a reverse calculation a few weeks back and had them announcing serious QE (3 or 2.5) in August or early September to pull that off.

But Obama's numbers are down and Romney is ahead in the funding game (some people notice things like that) so I wonder if he'll move the QE invasion forward to early August so as not to fall behind in the last stretch.

So sometime in the next 4 weeks. Watch for it.

SheepDog-One's picture

OK marked it down, QE sometime in the next 4 weeks....definitely didnt put any money on it though.

markettime's picture

Float the markets on rumor, once they stop falling for the bluff then jump in and rescue them while praying it will last though elections. And they very well could do it with the lack of volume trading in the makrets right now. 

Quinvarius's picture

There is no way a politican will wait to play this card until after an election.  And, I don't think the system will allow us to wait that long.

My biggest hope is that Bernanke will do it correctly this time and address the public debt burden as a way of fixing loans instead of just the bank debt burden.  This economy is just not going to recover until it gets this rock off of its back.

engineertheeconomy's picture

Time to fire up Lincoln's old printing press

We could payoff the debt in like 2 hours

Even here on Zerohedge the lack of I.Q. points




PrintingPress's picture

I believe the lack of I.Q. points in your own brain is the cause of your pain. 

FieldingMellish's picture

An infinite amount of QE is guaranteed. It was inevitable once the debt bubble was blown. Its simply a question of when, not if.

The Monkey's picture

Definitely a sign that more QE is on the way.

Mr Lennon Hendrix's picture

On the way?  It has never stopped! 

What are POMO auctions if not QE?  What is OT2 (continued) if not QE?  What is ZIRP if not QE?  What are UST auctions where the PD + Direct takedown is more than half of demand when the the PDs flip the bonds to the Fed T+1?

QE Continues

engineertheeconomy's picture

An "end to easing" is troll talk...

A better description of Quanitative Easing would be "Permanent Hyperbolic Niagra Falls Type Volume Hyperinflationary Printing Press Bearings On Fire Worthless Paper Transfer of Wealth Fucking Scam"

If the ice caps melted it would raise the sea level 3 feet.

If every dollar ever printed were to be thrown in the ocean, it would raise the sea level 3000 feet.

The reason you don't see it in "the economy" is that it's all in the hands of the .001%

mark my words

El Oregonian's picture

QE is short for Quick Enema into the economy for unleashing the rapid "flow" of dollars in a hopelessly stopped up system.