Forget About QE… I’m Worried About UC

Phoenix Capital Research's picture


Let’s just be blunt here.


Inflation is back in a big way. It’s not going to show up in the official numbers, but if you’ve paid for gas or food or healthcare recently, you’ve no doubt noticed that:


  1. Things are a lot more expensive
  2. You get way less bang for your buck (food packages are shrinking while prices remain the same)


This has been the case for some time now. However, the Fed’s QE 3 program, combined with the ECB’s OMT program, (both of which are “open ended” or “unlimited” in scope), have taken things to a whole new level.


Which is why we need to be concerned not with QE, but with UI: Unintended Consequences.


The Fed is largely composed of academics with little if any professional/ banking experience. These are people who use flawed data (case in point, the inflation measures in the US are a joke) to build models that they believe explain how reality works.


Setting aside the math and intelligence used to build these models, pure common sense begs the question, “how can someone who’s never worked in the real world, build a model to explain reality?


The simple fact is that they can’t… which is why the Fed’s policies have and will continue to unleash a slew of Unintended Consequences.


For instance, QE 2, which saw the Fed spending $600 billion, pushed food prices to record highs, kicking off a wave of riots and civil unrest throughout the Middle East.


So what will QE 3 bring?


The short answer is: nothing pretty. Gas and food prices were already high before the Fed announced QE 3. They will be going much higher in the future (Oil is currently falling based on Saudi Arabia working with the US Government to suppress prices).


Higher inflation means higher operating costs for corporations. Corporate managers (folks with real world experience) will adjust accordingly, most likely by firing people.


Which pushes unemployment even higher.


This is just one example of the slew of Unintended Consequences we’re going to be facing as a result of the Fed’s actions. There will be others… none of them good.


On that note, the time to start preparing is now. The printers are running. The Great Currency Debasement has begun. Some folks will walk out of this mess winners. Most will walk out as losers.


At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners. We have a host of FREE Special Reports devoted to helping readers prepare for the coming Debt Implosions in both the US and Europe.


We also feature a special report devoted to inflation as well as which investments will perform best during periods of high inflation (periods like the one we’re entering).


All of this is available 100% FREE at


Best Regards,


Phoenix Capital Research


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Elmer Fudd's picture

What will all the dependents of the FIRE economy do as the lake dries up?

Snakeeyes's picture

Well, I have practical experience on Wall Street in MBS and Treasuries. Here is one of the unintended consequences of QE-MBS: MBS is now just a shadow Treasury market.

1. Fannie 30 current coupon spread falls below 20 bps.

2. Fannie MBS convexities shrink to near zero for any MBS over 4%.

The Fed just killed any mortgage spread making MBS about as attractive as Treasuries.

Hunt elsewhere my friends. Ben killed the MBS market.

WhiteNight123129's picture

Quick question, what happens if there is no circulation, is it possible to have inflation with no circulation, if so how?

DeFeralCat's picture

There is inflation caused by speculation. If the price of corn is pushed up because folks are allowed to take market positions on it without having to store it, then they can push the price up for no other reason than speculation. Monetary velocity is at Depression levels. The Draghi-Bernake reach around is because they see what we all see here- and probably more- that demand has fallen off a cliff and there is not much they can do to change that course. Inflation will be temporary and possibly the final nail in demand that causes the correction which is just around the corner.

nofluer's picture

"(food packages are shrinking while prices remain the same)"

A standard stragety to ATTEMPT to avoid inflationary "price shock" - especially in a world where the FED is lying their butts off about inflation.

One of the grocery items I used to call 25 - 30% inflation over the last two or three years was a certain brand of frozen burritos. They used to come 10 to a package for about $3. Then one day I checked them and there were only 8 burritos for the same $3. So time went on, and one day (I KNEW the inflation hadn't eased) I had to actually BUY a package of the things to find out what they'd done to keep the price at around $3. They went from stuffing the burrito with meat and beans, to essentially painting the shell with a thin layer of "filling".

Given the present near complete lack of meaningful content, I predict this company will die in the near future because they've "painted" themselves into a corner. Their only choices now are 1. charge more for the no-content of their present product. (They probably have driven most of their customers away already, so what do they have to lose?) 2. Return to stuffing the shells and charge about $5 for the 8 units. ("NOW with EVEN MORE FILLING!") 3. Stuff the hell out of them and change the number of units, to 13 or 14, and charge about $9.35. (Which is what Hershey's did with their "fun sized" candy bars.)

Increasing the package count by an odd amount and the price by a different odd amount makes it more difficult for the customer to compare the new content and price to the old.

Then the game's at restart and they can keep playing as long as they have people who don't understand the word "inflation" for customers.

DeFeralCat's picture

They could stuff them with devalued dollars to make them look big and fat!!!

Nassim's picture

If you eat that sort of crap, you can only blame yourself for looking like a hippo. :)

barroter's picture

Why listen to any financial type?  Since a while back, I treat anyone, trying to sell me anything, like they have the plague.

DogSlime's picture

oops - posted in the wrong place

rhyzimmer02's picture

He admitted his QE gaffe? You mean he admittedn that everything he wrote since QE2 was a joke

I still like a laugh

Four Reasons Why The Fed Will Not Announce QE 3 This Friday
August 28, 2012
The biggest even this week is Ben Bernanke’s Jackson Hole Speech which will take place on Friday August 31. It was at Jackson Hole in 2010 that Bernanke hinted at QE 2. With that in mind, many investors believe that the Fed is about to unveil or at least hint at a similar large-scale monetary program this Friday.

We, at Phoenix Capital Research, disagree for three reasons. Number one, stocks are at or near four-year highs. With stocks at these levels, there is little reason for the Fed to use up any of its remaining ammunition.

Secondly, food prices are soaring due to the worst drought in 56 years. Some 63% of the lower US 48 states are experiencing a drought. As a result of this, the USDA has said that 50% of the US’s corn crop will be in poor to very poor condition.  Soybeans are in similar shape.

Thirdly, gas prices are near their all time highs.

As far back as May 2011, Ben Bernanke admitted publicly that the consequences of QE (higher food and energy costs) were outweighing the benefits (higher stock prices).

With stocks where they are today and food and energy prices where they are today, there is little reason for the Fed to unleash QE 3 or any large monetary program. Indeed, if the Fed were to do so, it would most assuredly cost Obama the election as the ensuing inflationary pressure would hit voters’ pocketbooks.

With the election less than 100 days away and Mitt Romney and the GOP increasingly targeting the Fed and specifically Bernanke as a problem, the Fed isn’t going to do anything that could risk Obama losing his bid for re-election. This is especially true given that there really isn’t a sound argument for more QE at this time: food prices, energy prices, and stocks are high, while interest rates are at or near all time lows.

There is a fourth and final reason why QE is not in the cards. QE is a policy through which the Fed prints money to buy Treasury or Agency debt from the banks. The problem with this is that these bonds are the senior most assets that the banks use to backstop their trading portfolios.

In the case of the TBTFs, these banks only have $7 trillion in assets back-stopping over $200 trillion in derivative trades. The last thing these banks want is to swap out their senior most assets (Treasuries and Agency bonds) for more cash (remember the banks are already sitting on over $1 trillion in cash in excess of their required reserves).

In simple terms, the banks don’t want cash. They want bonds, which they can use to leverage up their trading portfolios: their primary source of revenue with interest rates at or near zero.

Indeed, Bernanke has all but admitted this recently, saying “I assume there is a theoretical limit on QE as the Fed can only buy TSYs and Agencies… If the Fed owned too much TSYs and Agencies it would hurt the market.“

Why would it hurt the market? Because the banks NEED assets/collateral. And QE takes this out of the system.

For this reason, we believe it is highly unlikely the Fed will announce QE at this time. There really is no reason for it to do especially since QE would in fact hurt the big banks: the very institutions the Fed has been trying to prop up.

On that note, I’ve already alerted my Private Wealth Advisory subscribers to a handful of investments that will explode higher when the Fed disappoints this Friday. It is precisely this kind of thinking ahead and “unquantifiable” analysis that has allowed us to lock in 73 winners and only one loser over the last 13 months. And I fully expect we’re going to find similar success over the coming year.

The reason? Because we look beyond simple financial statements and press releases to find the “unquantifiable” opportunities (and risks) that most newsletter firms aren’t aware of. In today’s markets, everyone has access to the same information, the only way you can crush the market is by seeking out the underlying realities lurking “between the lines.” That’s precisely what we excel at Phoenix Capital Research. And it’s why our research has been featured everywhere from RollingStone magazine to The New York Post, Crain’s New York Business, CNN Money, and elsewhere.

To find out more about our proprietary research methodologies and start receiving my bi-weekly investment research reports as well as real time “buy and sell” alerts via email, you need to take out a subscription to Private Wealth Advisory. To do so…

Click Here Now!!!

Graham Summers


LMAOLORI's picture



Graham I think ben understood the consequences he just didn't give a damn. I understand perfectly well about QE3 you were far from being alone in making that call. To people who view the world in a non jaded way they can sometimes not fathom that an action like that would be taken because they understood the consequences like the ones you are writing about now. The Oil I agree with the fellow above it is being suppressed it is a political move there again likely hard to fathom.  Someone went so far as to use the Fat Finger yesterday mistake I think not. To each his own on housing I am happy as hell that I have my cozy home in the country with some acres to grow and raise food bought it at a decent price too after the collapse which I still can't believe people didn't see it coming. Buckle up it's going to be a bumpy ride.

Rabobank Report: Agflation To Hit Animal Protein And Dairy Industries, Drive Food Prices Up 15%


YellowDog's picture

Isn't this author the same guy who said there would be no QE3?

Why would I listen to what he says?


Treeplanter's picture

The May Crash has merely been delayed 6 or 7 months.   The polls are cooked and the Chicago putz is toast.  Hopey changey ala ca zam.

10mm's picture

All by design.There will be a diff Fed.Not called a Fed,but the Order will come together.The FED is dead.

steve from virginia's picture


Too much effort is expended on trying to figure out what they ('They') are going to do. Who really cares?


Peeps are figuring what the Fed Chairman is going to do. What Draghi is going to do, what Merkel and Hollande, what the Chinese are going to do. Too much mental effort directed toward the outcome of 'money printing'.


Nobody seems to recognize what is already happening ... right under everyone's feet ... a steady, relentless unraveling of institutions, a decline of available credit, less purchasing power, more 'bad news' with a decrease in the 'good news' to offset it. Everyone knows we are in a bad place, they just don't appreciate how bad a place it is.


To QE or not QE ... it's not even a question! It's a ploy to buy some time. What matters is everyone going broke. Escaping being broke ... is something nobody wants to know.


This entire crisis has been mis-stated from the beginning. It's capital exhaustion due to industrialization rather than defective balance sheets. Nobody wants to look at capital b/c doing so would make clear that it is diminished and that the process of using it is defective, We don't want to second-guess ourselves. We believe that if we ignore capital we can keep our capital-destroying toys ... that the technicians can figure out a way for us to keep them. That is what QE is all about ... buying time with borrowed money to keep the status quo afloat until the Apple Computer Company can give us zero-point energy in a can.


Sorry, it won't happen. Capital cannot 'return'. Our activites have made our situation dire. Easing/not-easing won't do anything but make matters worse. The capital is gone and won't come back.


What is scary is the time frame. Capital is gone forever! No new capital, not in ten-million lifetimes ... we blew it.


There are some ways to 'fight the power' and try to bail ourselves out: first step is to get rid of the TV, get out of debt and get rid of the goddamned automobile. Why? These things are going to go anyway! They are in the process of going away regardless of what the institutions do to keep them. Don't believe me, ask Europeans: an entire continent that has bankrupted itself so that some fools might drive.


Getting rid of is hard, getting around the US without a car is massively difficult ... but it is a lot easier than what Americans are facing right this moment. The entire finance system of the United States is teetering at the edge of the abyss. Bernanke offers unlimited loans for a reason ... it's also an act of supreme desperation, the last act of a man with nothing to lose.

DogSlime's picture

Sorry, it won't happen. Capital cannot 'return'. Our activites have made our situation dire. Easing/not-easing won't do anything but make matters worse. The capital is gone and won't come back.

What is scary is the time frame. Capital is gone forever! No new capital, not in ten-million lifetimes ... we blew it.

Eliminate the corrupt financial bullshit.  Let the banks fail.  Collapse the multiple-rehypothecated derivative shite.  Losses will be incurred, but that's unaviodable.  Write off the debts.

Become energy self-sufficient.  It would take massive investment into renewable energy but 500 billion invested in energy self-sufficiency would yield a fuck-load more benefit than 500 million spent bailing the banks out (followed by another 500 billion, followed by another 500 billion... printing all the way).

Become food self-sufficent (in tandem with energy).

Mine stuff, make stuff, invent stuff.

In the long term, the only thing we've "blown" is fossil fuels.  They're gone soon enough.  If we have renewable energy supplies and we're energy self-sufficient then I don't see why proper wealth generation can't return.

First and foremost, though, is that the whole corrupt financial cesspit has to be drained.  Ideally the perpetrators will also be tried, convicted, and rot in jail forever.

That's my opinion for what it's worth.  I have no faith whatsoever that such actions will be taken.  I think the human race is screwed because too many humans are too fucking stupid and/or greedy and there are seven billion of them... so yeah, we're fucked but I don't think that we are fucked because there's no way out - just that we're too stupid/stubborn/greedy to implement the solutions.

Simplifiedfrisbee's picture

Absolutely brilliant comment SFV. Testimony be told, I acted upon the three powers to "fight the power" over a year ago, not by choice but by decisions that were presented to me. I decided to act against my own ego and today the struggle is not daunting but rather liberating.

new game's picture

i ask my boss (who owns a small business) what he thought of qe3 and he was clueless.

i think it is worse than you give peeps credit for knowing.

they are so fucking clueless it is hard the understand.

the very policies that will affect their life the most and they could care less.

OR  are intimidated by econ as it IS just confussing enough(by design) and fucking boring

and MOST IMPORTANT served a an extra large heaping of lies and distortion (keyns BS) so they

couldn't figure it out w/o devotion to the subject...

such is the world we live in - gamed by tptb to fuck the peeps...

bunnyswanson's picture

Truth Be Tolled



USA is being transformed into a country that I believe is unable to be imagined.  What is in the clip is going to go beyond Texas.  No one knows about this.  Meetings occur and the project is said to be stopped or changed as requested but then it goes on as originally planned. 

I believe that if everyone realized what is happening in Texas, they'd realize their country is being invaded and what we are witnesses to is what has happened in Greece, Spain, Portugal, Ireland.  Dismantling of America is taking place.

Bringin It's picture

bunny - the vid you link to is gone.  You have caught my interest. What was in it? Thanks

marathonman's picture

Was at a friends house recently and he was talking about our need to socialise healthcare to reduce costs.  It was at that point that I knew that my moves into gold last week were the right moves.  The Democrats will never admit that their forays into vote buying are pancaking the US high rise on the way down.  That same fool friend voted for BHO in 2008 and will probably do the same in 2012.  I'll sleep tight knowing that his government is redistributing wealth to me via precious metals as they hyperinflate the dollar to try to keep sustaining the unsustainable. 

The irony is especially bitter.

CynicLaureate's picture

They're not redistributing wealth to you.  The wealth you put in gold is the constant, and your dollars are devaluing.  But when you sell/barter/trade your gold for something else, the US Government will want 28% of the illusory "gain" in dollar terms.

You're losing, too, just not as fast as the people without gold.


akak's picture


But when you sell/barter/trade your gold for something else, the US Government will want 28% of the illusory "gain" in dollar terms.

Up to 28%, depending on one's gross income level.  For those whose tax bracket does not reach or exceed 28%, they will only be taxed at their prevailing income tax rate.

It is widely, but erroneously, believed that ALL profits on gold and silver (and other "collectibles" in general) are uniformly taxed at 28% in all cases, but that is incorrect.

CynicLaureate's picture

By the time you need to sell/trade your gold for food, even people on welfare will be multi-millionaires.  And they'll probably raise the tax on gold, anyway.  Heck, by 2016 we'll probably have a new Census Bureau annual form: the DGHR (the Domestic Gold Holdings Report) to go along with the SED (check out

So we'll all be in the 28% bracket, and I can't believe they're not going to want to track gold as soon as the returns from the FBAR reporting start to dwindle.

By 2016, 28% will look cheap.

sosoome's picture

It's capital exhaustion due to debt.

SmittyinLA's picture

We all know what they're gonna do, we have 100 years of total consistency, they are as predictable as the sun, they're going to PRINT, its the only thing they can do, their political agenda is funded with monetary fraud, their only option is to PRINT.

Cult of Criminality's picture

"These are not unintended consequences; quite the opposite "


lasvegaspersona's picture

inflation certainly cannot be called 'unintended' it was the stated main reason for doing QEi.

In fact none of this will surprise the Bernack, he is just doing what he must to feed the Govt Beast. That MUST be done, all else is more correctly called 'collateral damage'.

HpDeskjet's picture

The "funny" thing is, this inflation is actually deflationary... Unemployment stays high so salaries wont increase while food/gas do => less left to spend on "assets" like houses and stocks....

SymforniX's picture

These are not unintended consequences; quite the opposite.

Likstane's picture

No shit!  Somebody tell Graham Summers. 

j0nx's picture

Don't matter. The people aren't even close to figuring it out. They look at you like you're a crackpot if you describe it to them and Obama is going to win by a landslide because the GOP nominated the least likeable person they could find while openly stealing the nomination away from the one guy who could beat Obama. All of these things will just validate the policies of this crew even more. Americans are fucking retards who after 4+ years of this nonsense are even further away from discovering the truth now than they were then. It's like taking candy from a babe. Besides, the MSM will never report this with any real fervor and we all know if the MSM isn't reporting it then it's not happening. Let the sheep wonder why their Schlitz is costing them 30% more now than it was last year because I could care less about them anymore.

marz929's picture

I'm reminded of a conversation my wife had with the girls at the gym way back when. They thought QE was a reference to the ship. Not a clue as to what was going on with the FED. She doesn't discuss economics with them anymore.

Manthong's picture

Long Eggs..

Eggs at Costco up 20% since they changed to 24/package..  5.39 then,  5.89, then 5.99, now $6.49..  just this year.

I don't expect they will be going down in price anytime soon.

krispkritter's picture

Thankfully my hens aren't Union so costs are pretty stable.

The supplemental feed they do get has nearly doubled in two years though: corn $6 -> $11.50, scratch grains $9 -> $17.50, crumbles $8.50 -> $16  Thankfully they get to free range which cuts down on any feed use.

new game's picture

brass with heavy metal and some propellant.

up >100 percent and tracking gold to a tee.

which has the most utility?

both about the same as far as <back to dollars>

nice weighted allocation g, s, and brAss...

Citxmech's picture

I was just spinning those numbers last night!

Decided to buy 1k rds of LC M193 instead of the equivelent $$ in Ag.

 What a world.

devo's picture

What Bernanke and others fail to grasp is that there is no demand for products, including housing, and thus assets could drop much more, percentage wise, than the dollar (i.e. deflation) despite all the printing. Said another way, I could see the Dow at 8,000 during a massive market force correction, but does anyone think the dollar will be halved in that scenario? It is losing value now, but it might buy more later. Bizarre situation.

I think long-term food storage or food producing land is the best investment. In 30 years when you're ready to open that 50lb rice super pail, it will cost a lot more than $60. That is a huge purchasing power gain, and investment can't get more safe than that. After food and land, I think PMs are the second best invesrment, and cash third for the reason stated in my first paragraph (at some point assets get crushed more than the dollar--see 2008).

My plan is to not buy a single product now (i even canceled cable and downsized to city internet, which is not as good, but it is 1/3 what comcast charged), bike everywhere so I can to avoid gas, buy years of bulk food, etc so I can negate QE3 effects while waiting for an asset crash. 20%metal/80%cash in the meantime.

Edit: I am also seriously considering shorting this market, either with extremely bullish Dec Calls or in the money puts. After the election, Obama and Bernanke will not care about the economy. I think we'll see a shift from "we must inflate asset prices" to "we must put police force in place"...

JohnKozac's picture

How about arsenic laced rice according to Consumer Reports:


Watch what you store. How does arsenic get there?

NoTTD's picture

Arsenic is a background element which is present in practically every natural product, including water.  The envronmental left cannot comeot grips with this and periodically start shouting about it as though it can be changed, like now.

devo's picture

I saw this. Not sure what to make of it. I suppose in an emergency I'd risk cancer over starving. But in everyday life, I will probably reduce my intake to 1 meal per week that uses rice. It's a real shame we can't eat any food safely anymore.

I'd like to see the study, too. It could be propaganda to keep people from storing food. I don't want to be "that guy", but this govt is desperate for us to buy crap we don't need instead of food so...

Umh's picture

Or just maybe the people that produce potatos would rather you ate less rice??

petolo's picture

Good points. Don,t forget bottled water. Who knows what kind of shit they will dump in it. Lots of candles and batteries.A portable generaotor, if you have a place to store fuel . A country boy will survive and those with forethoughtin the city.

devo's picture

I live in a 1BR apt, so for me it's superpails and 5 gallon water buckets. I can only fit about 20gallons right now. It's better than nothing.

We have family in the country should we need to get out of Dodge.

imbtween's picture

bullish, time to stock up on eminis

digitlman's picture

Forget about GS.

lordbyroniv's picture

bBbBut I thought they werent going to do QE?


I thought they in fact couldnt?


Me no understand!?!?!?!

DosZap's picture


Let’s just be blunt here.


Inflation is back in a big way. It’s not going to show up in the official numbers, but if you’ve paid for gas or food or healthcare recently, you’ve no doubt noticed that:


  1. Things are a lot more expensive
  2. You get way less bang for your buck (food packages are shrinking while prices remain the same)

Those of us who have been SCREAMING this for over 2yrs, are finally getting others to feel the pain?.

If you do the shopping, and fuel purchases, WE have noted that time and again,while everyone else was screaming Deflation.