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The QE Experiment is Failing... Will Stocks Crash?

Phoenix Capital Research's picture



We’ve long maintained that Japan is ground zero for the “QE works vs QE doesn’t work” debate.

The Fed’s economic models, and 99% of the economic models employed by Central Banks in general, believe that monetary easing can bring about an economic recovery. The primary argument for this crowd if QE has thus far failed to produce a recovery is that the QE efforts have not been big enough.

And then there’s Japan. In a nation with GDP of $5.96 trillion, the Bank of Japan has launched a $1.4 trillion QE effort: a monetary move equal to 23% of Japan’s GDP.

To put this into perspective, this would be akin to the US’s Federal Reserve announcing a QE effort of over $3 trillion.

Suffice to say, Japan’s QE most certainly should be considered “enough” by even the most pro-QE supporter. But the very problem is that it does not appear to be having the intended effects.

The following is an article from the Wall Street Journal. I’ve highlighted a few choice items for your review:

At Koeido Co., a 156-year-old sweets maker based in this city in southwest Japan, chairman Shuichi Takeda says he feels the country may finally be coming out of a 20-year funk.

Sales of Koeido's sweet millet dumplings are holding up. The company is spending around 80 million yen ($800,000) to renovate two shops—a sign of how Japan's economy is showing signs of life, lifted in part by a flood of easy money from the central bank that has boosted stocks and helped spur growth.

But with future demand unclear, and costs for imported sugar rising, Koeido still isn't bullish enough to take out bigger loans to replace equipment or expand its business—even though banks are begging it to borrow more.

"The economy doesn't necessarily get better just because of monetary easing," says Mr. Takeda. "And you don't borrow just because rates are low."…

It is an attempt to literally crowd banks and other investors out of the market and force them to put their money to work in other ways—through loans or investments in real estate, for example—to help stimulate the economy…

"The idea that the Bank of Japan will buy bonds, and then the extra money will start flooding into corporate or retail loans—that's just a theoretical exercise,'' says Chugoku's Mr. Miyanaga. "Most important is [for the government] to hurry up and produce a concrete growth strategy, which will spur private economic activity."

I want to point out that the individuals who are expressing basic common sense views about monetary policy and the economy are businesspeople who run actual businesses, NOT academics.

This is what happens when academic monetary theory meets reality: theory proves to be just that theory.

There are some perceived benefits (the markets rally) from the easy money high. But the inevitable hangover is usually intense (see 2000-2001 and 2007-2008).

So stocks rally for now. But eventually this will end. In fact it may come sooner rather than later.

Remember 2008? Everyone said everything was just fine... right up until the Crash hit.

We're seeing the same warnings in the markets now. The time to prepare is BEFORE it hits.


For a FREE Special Report outlining how to protect your portfolio from this, swing by:


Best Regards

Phoenix Capital Research 



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Wed, 11/20/2013 - 21:56 | Link to Comment Randoom Thought
Randoom Thought's picture

They knew from the beginning it would fail since history as early as the first part of the nineteenth century had proven the Wall Street modified Keynsian tripe to be just that, total B/S. They simply would not admit it... as if that changed any facts. It did not serve their ultimate purpose to reset the system and make the biggest banks fail and have to recapitalize back in 2008. IMO, the fail would not have been epic enough to bring in world government and a global elitist financial system. That appears to be their aim.

Wed, 11/20/2013 - 19:23 | Link to Comment steveo77
steveo77's picture

Seriously IMF proposes world wide bail in, where not just banks but financial institutions of "all sorts" can independtly, without any court review, just take your money, even that you used to have in their instiution.    Seriously.

Wed, 11/20/2013 - 18:45 | Link to Comment John___Connor
John___Connor's picture

I wonder how much this guy has paid in total over the last five years to advertise on ZH for protection against the emminant market crash that never came. I guess eventually, someday, he will be correct. 

Wed, 11/20/2013 - 18:38 | Link to Comment The Heart
The Heart's picture

If one was into investing into the future, what would it be like IF, something huge happened as planned, or advanced for more control purposes?

Opium for the masses!!!

Wed, 11/20/2013 - 17:54 | Link to Comment tunetopper
tunetopper's picture

The only think to consider is this:

how does the Fed get off the crack high it's on?

Do you really think that someone will one day wake up and decide that they have made enough money by arbitraging these USTs and MBSs?  And that its now time to quit.   I think it will take an intervention.  Who wants to take on that task, or better yet- what market force will do it?

Who is the collection agent for the world's central banks expontial profligance?

His name is..... Mr. Inflation,

and he gets his reward by stealing your money's purchasing power. You cant save enough to ward it off. The only thing you can do is buy the right asset classes.  Those asset classes are Farm Land, Fertilizer, Fuel, Firearms, Friends (that you can trust) to band together with, and Family. 

Yes- it'll end bad, old Mr 'flation - he'll get us all in the end.



Wed, 11/20/2013 - 17:25 | Link to Comment robnume
robnume's picture

This must be "the best possible of all worlds". Yeah, right. And, the sky isn't falling.

Wed, 11/20/2013 - 16:52 | Link to Comment walküre
walküre's picture

Yes, it will all crash into dust including GLD, BTC or VIX.

Everything virtual or on paper will simply vanish into the dustbins of history.

When confidence slips, it doesn't matter what anyone thinks its worth. Good luck eating stock certs when the corporation simply dissolves. Treasury bills are useless like a third teet when there's no way to either sell them or collect on them.

Bricks, mortar, 2x4, fencing, precious metals, livestock, soil and so on will always have value because people need to eat, drink, shit, sleep and protect what they have. Wether it's as nation, as community or as family.

I've lost confidence years ago and I was early. But rest assured, it's like a disease and it will spread and nothing can stop it.

Wed, 11/20/2013 - 15:48 | Link to Comment ebworthen
ebworthen's picture

"Most important is [for the government] to hurry up and produce a concrete growth strategy, which will spur private economic activity."

Concrete shoes for future generations is about all they are doing, as with the U.S.

Wed, 11/20/2013 - 15:06 | Link to Comment Finnman
Finnman's picture

I'm quite sure that stocks will not have any problems. I think SP is permantly over at least 1600. It would be huge catastrophy to this World if stock markets could crash. Thanks to Bernanke and Yellen, it's impossible now.

Wed, 11/20/2013 - 15:10 | Link to Comment El Hosel
El Hosel's picture

Stocks crash?... See TSLA

Wed, 11/20/2013 - 17:36 | Link to Comment B.J. Worthy
B.J. Worthy's picture

No crash, all burn.

Wed, 11/20/2013 - 14:57 | Link to Comment Nobody For President
Nobody For President's picture

Of course stocks will crash - someday.

As Keynes hisself once said - "The markets can stay irrational a lot longer than you can stay solvent."

I lost a pile last year betting on fundamentals.

Fundamentals don't mean shit.

So now I trade the Fed, and what the HFTs are gonna do (and yeah, I'm always behind), and I'm makin' a little money. 

But betting on the crash? I don't think any zher is rich enough to short Uncle Ben and now Aunt Janet. So I'm staying cautiously long, keepin' my stops in, and waiting for the inevitable. Someday...$85B ain't gonna be enough to prop this cocksucker up, but meanwhile, I gotta trade what we got.

Staying out ain't enough for the adrenaline junkies...(I used to skydive and paraglide, now I trade this fucked up, so-called 'market' - same rush...).

Wed, 11/20/2013 - 17:57 | Link to Comment KingTut
KingTut's picture

Hopefully you've selected a new thrill sport that is not gravity powered ... all down all the time.

Wed, 11/20/2013 - 14:44 | Link to Comment detached.amusement
detached.amusement's picture

cue the self immolations on the fed's front steps

Wed, 11/20/2013 - 15:51 | Link to Comment mydogisprettier...
mydogisprettierthanyou's picture

That might be a good idea.


But as a newly single guy, Im having waaaaaay too much fun with the fairer sex.

Wed, 11/20/2013 - 14:43 | Link to Comment optimator
optimator's picture

QE is not failing!!  For proof just take the Long Island Expressway and pull off anywhere after you've gone around 20 miles.

Wed, 11/20/2013 - 17:44 | Link to Comment tunetopper
tunetopper's picture

Haha- good one!

Wed, 11/20/2013 - 14:15 | Link to Comment Sufiy
Sufiy's picture

Michael Snyder: Next Great Wave of Economic Crisis - Gold And Silver 

 Greg Hunter is hosting Michael Snyder this time, who provides a lot of very well researched facts for your own consideration about the state of the economy. With latest reports about tampering the all important employment numbers at Census Bureau our quest for Gold and Silver manipulations acknowledgement and confirmation can be assured in the not so distant future.

Wed, 11/20/2013 - 14:02 | Link to Comment LawsofPhysics
LawsofPhysics's picture

No, stocks will not fail.  Fiat will.

The good news;  we will all be trillionaires.

The bad news; we will all be trillionaires.

Do NOT follow this link or you will be banned from the site!