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Why Would the Fed Launch QE 3?
I continue to see commentators claiming QE 3 is just around the corner. I don’t see how this is possible because all of the Fed’s excuses for more QE are no longer valid.
First off, interest rates are already at or near record lows. So the Fed cannot argue that it needs to lower rates. Moreover, it’s not like lowering rates via QE 1, QE lite, QE 2, and Operation Twist 2 did much to help the US housing market. So QE 3 can’t be presented as a solution to housing.
Secondly, the economic data coming out of the US has been massaged to the point of not looking so bad. So the Fed cannot use the “economy is collapsing” argument this time either. And it’s not as though the public isn’t totally aware that QE 2 did next to nothing for the economy.
Indeed, the Fed spent $600 billion on QE 2 and had at most three months’ of improved economic data as a result (QE 2 was announced in November and the US economy rolled over in February 2011). The public is well aware of this as well as the fact that QE 2 saw inflation exploding higher.
Despite end-of-year decline, 2011 food prices highest on record – UN
Global food prices declined in December, but the overall annual average was the highest ever on record, the United Nations Food and Agriculture Organization (FAO) reported today.
Last month, FAO’s Food Price Index level was 211 points – 27 points below its peak in February. The decline was driven by sharp falls in the international prices of cereals, sugar and oils due to a productive harvest coupled with a slowing demand and a stronger United States dollar.
However, despite the steady decline in prices during the second half of the year, the Index overall averaged 228 points in 2011 – the highest average since FAO started measuring international food prices in 1990. The second highest average occurred in 2008 at 200 points.
http://www.un.org/apps/news/story.asp?NewsID=40925&Cr=food&Cr1=prices
Food prices hit all time highs in 2011, resulting in numerous revolutions and riots throughout the world. The increased cost of living also drew a lot of negative attention to the Fed from the US populace. So it’s not like the Fed can use the “QE will stimulate the economy” argument anymore.
The final argument for QE is that Obama needs the economy to recover to win the 2012 election. This argument completely overlooks the fact that Bernanke and the Fed are now politically toxic.
If the Fed were not in trouble politically, why would it:
1) Stage town hall meetings
2) Open up to Q&A sessions
3) Have “humanizing’ articles written about Bernanke in major media publications.
4) Moving towards more transparency on its forecasts and projections
These are all defensive moves. And the Fed wouldn’t be making them if it wasn’t under pressure. Which makes it all the more unlikely that QE 3 would help Obama. The public is already outraged at the Fed moves. And QE 3 would send inflation through the roof. How exactly would this benefit Obama’s Presidential campaign?
In the end, the bar for QE 3 is much, much higher than most people think. The days in which the Fed could do whatever it wanted are over. And there simply isn’t a decent argument for QE 3 at this time.
It’s not as though QE 3 would do much for the market anyway. Look at the recent coordinated Central Bank intervention in November… the benefits lasted less than a month.
And somehow QE 3 is going to send stocks through the roof? Give me a break. Look at earnings. They’ve been a disaster, and investors are pulling their funds from the market en masse.
On that note, I truly believe we’re on the verge of the next round of the Great Crisis. The credit and bond markets are already starting to predict another 2008 event. Only this time things will be even worse because the Fed has already used up its tools into combating the First Round of the Crisis.
Many people see their portfolios go up in smoke with this. But you don’t have to be one of them. In fact, I’ve laid out a series of steps every investor can take to prepare for the coming European Collapse.
These steps are laid out in five Special Reports that can all be downloaded for FREE at http://www.gainspainscapital.com under the Our Free Special Reports tab.
To pick up your copies, swing by http://www.gainspainscapital.com today!
Good Investing!
Graham Summers
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Posted on January 19, 2012 by stacyherbert
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http://maxkeiser.com/2012/01/19/kr238-keiser-report-scam-on-epic-scale/
The thing is that they wont call it QE3.. it will probably be disgused as several programs .... but the end result is there will be more printing.
Fiats are in the "see-saw" movement.... USA get bad, ... print.....Euro get stronger .... 5-6 m passes.... they find problems in Europe (like they just found it for the first time ;) ) ... Europe prints in disguesed ways ... dollar get stronger..... 5-6 m passes ... news proclaim USA is again in trouble....Fed prints..... Euro goes up... and so on... and so forth .... UNTIL somebody blinks... the question is who will be first USA, Europe, England, Japan or China....
then we either have chain reaction in crashes... or ppl worldwide panic... in both cases we get a bag of inflation .... may be preceeded by quck and dirty disinflation or not.
http://www.bloomberg.com/news/2012-01-19/s-p-500-rallies-most-since-87-a...
The markets Rallied most since 1987! (I will increase my short positions)
http://topdocumentaryfilms.com/richard-dawkins-blind-watchmaker/
Richard Dawkins: The Blind Watchmaker
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along these lines, if we take the drug addicted analogy
and we ask "does the "addict" , that part of the brain and
central nervous system, concern itself with what the liver
or kidneys, or heart, or asshole, or pancreas need?"
not really, it is not a question of why inject greater "liquidity",
or junk , but a question of can it be injected. if the answer
is 'yes' ,it can, it will be injected unto the point of death. the fed
and the addict do not operate in a rational, democratic
and considered realm yet their actions cause
components to die together due to decay and toxic accumulations in
systemically important places that are initially overlooked or
ignored, places of apparent systemic "insignificance". the economy?
no, it is the people. the people are considered to be just
replaceable and insignificant parts of a greater system of grandeur,
the magical market with all its magical powers ! it wants fiat
sacrifice so the high priests must feed it the liquidity it demands.
forget the people, they have no say or comprehension of the magic.
hundreds of billions of solar systems need to be financialized.
its benny and the inkjets from here on out. hail the high priest of
virtual digital ink, the time has come to bail out the galaxy and the
white spirit boys is on it.
Elton John Bennie & The Jets 76
http://www.youtube.com/watch?v=1jYlk2UnlIg
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" i read it in a magazine " e.j.
.
Lyric:
Hey kids, shake it loose together
The spotlight's hitting something
That's been known to change the weather
We'll kill the fatted calf tonight
So stick around
You're gonna hear electric music
Solid walls of sound
Say, Candy and Ronnie, have you seen them yet
But they're so spaced out,BuhBuhBuhBuh Bennie and the Jets
Oh but they're weird and they're wonderful
Oh Bennie she's really keen
She's got electric boots a mohair suit
You know I read it in a magazine
Ah ha, BuhBuh Bennie and the Jets
Hey kids, plug into the faithless
Maybe they're blinded
But Bennie makes them ageless
We shall survive, let us take ourselves along
Where we fight our parents out in the streets To find who's right and who's wrong
Say, Candy and Ronnie, have you seen them yet
But they're so spaced out,BuhBuhBuhBuh Bennie and the Jets
Oh but they're weird and they're wonderful
Oh Bennie she's really keen
She's got electric boots a mohair suit
You know I read it in a magazine
Ah ha, BuhBuh Bennie and the Jets
Say, Candy and Ronnie, have you seen them yet
But they're so spaced out,BuhBuhBuhBuh Bennie and the Jets
Oh but they're weird and they're wonderful
Oh Bennie she's really keen
She's got electric boots a mohair suit
You know I read it in a magazine
Ah ha, BuhBuh Bennie and the Jets
Bennie, Bennie and the Jets
Bennie, Bennie, Bennie, Bennie, Bennie and the Jets
Bennie, Bennie, Bennie, Bennie, Bennie, Bennie and the Jets
.
nevermind
Agree with your prognosis for a change, whether it will be true or not remains to be seen but your reasoning is cogent, much better than with where stock markets are headed.
Agree with your prognosis for a change, wthether it will be true or not remains to be seen but your reasoning is cogent, much better than with where stock markets are headed.
ATTENTION THRILL SEEKERS .....QE III has been launched....and it is what has and will continue to move this market ( American Equities ) higher. The Juice is already on the loose. And the Juice dont like gold but gold will never leave the party entirely unless the Fed approaches worldwide control with fancy scmoooozing. Olde Style. Everyone on board we 've got coffee and cigars!
"
Why Would the Fed Launch QE 3?"....because they can.It is like pondering why my rat terriers kill rats for fun...they do it because they can, like to, and are hard wired from birth to do so. Of course, what they do makes far more sense than what our Fed does....
I have zero doubt about more QE, stealth or otherwise. ECB will print and it will force Ben to print. Where I take issue is the idea that the S&P will just float ever higher...but perhaps I'm just naive.
I'm not foolish enough to believe the market cares about fundamentals or takes notice of the events in the "real world" - but reality, however inconvenient is looming.
This market is no volume, no conviction, massive complacency, no volatility, few shorts and likely no bid under it. The massive liquidity that's coming from the Fed and ECB isn't going to send the S&P to 1500 - it going to prevent the banks from imploding and that's about it.
The PIIGS didn't go away and dooms day cometh - someone is on the wrong side of that trade and the losses will be catastrophic. Granted, CDS will never be allowed to trigger, but just because the fuel tank doesn't explode when you hit the wall at 200 mph doesn't make it a good crash. The Fed and ECB will keep the banks duct taped together while the rest of the world economy rots.
Being long at 1300 is a special kind of insanity imo...and damn if I don't look good in shorts.
I have always felt especially insane right before I learned that I was especially logical and rich. Not counting the times I have felt especially insane and learned I was in fact quite correctly in touch with my feelings. Volume wont come in until we cross some obstacles here... leveles on levels. Another 1 1.5% intraday in the SPX at the very least over next session or two ...you will be alright!
graham summers lives in a purple bubble .
the sounds of Q3 will knock his red socks off.
the buck is toast .. watch and learn
no charge
Bullish (!)
http://www.bloomberg.com/news/2012-01-18/china-developers-slow-home-sale...
Am bearish! i hope the market rallies 3% more so that i can make the final kill
http://www.bloomberg.com/news/2012-01-19/s-p-500-rallies-most-since-87-a...
avoiding Depression-style riots and chaos would be a good reason to launch QE3.
Poor Graham Summers is as clueless as they come: "First off, interest rates are already at or near record lows. So the Fed cannot argue that it needs to lower rates."
That's why it's called Quantitative Easing instead of Rate-Targeting. Once you've lowered the target rate to zero, you can no longer ease credit by rate-targeting. So the Fed shifts to targeting the Quantity of Money.
It no longer has anything to do with the economy or propping up asset markets. That was a Bernocchio red herring. The point of QE--and it's going on right now--is to recapitalize the insolvent banks who are the shareholders of the FRB.
If Graham really wants to know why QE3 to infinity is necessary, he only has to look at this chart:
http://research.stlouisfed.org/fred2/series/M2V
Money velocity is at the lowest level in 60 years and headed for Pellucidar.
Why would the Fed launch QE 3? For the same reason that a quarterback runs for his life. to escape being sacked.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
Sir, where is the super duper crash you were referring to?
"Sir where is the super duper crash you were referring to?"
Excellent question and your asking it seems to indicate the author might be talking his "book", and crying wolf, possibly too many times? However, I can assure you, with absolute certainty that a super duper crash has taken place, right under your nose so to speak without you, apparently noticing. It is not a future event; much of it has already taken place over the last 4 decades and most in this country are suffering grievously from it. Every crash in history unfolded just like this one, slowly and imperceptibly over decades. If you are waiting for a one day crash, don't hold your breath. Since the Vietnam War era wages have crashed, prices have skyrocketed, quality has plunged, freedom has all but been eradicated, truth has vanished, ethics went on a hunger strike, the most admired are liars and thieves, the Constitution of the United States is a dead letter, as is the Bill of Rights and the Declaration of Independence and the principles enshrined within are trampled on daily. There is worse to come, no doubt about that, but much of the damage has already been done. The Great Depression lasted fram 1929 to 1945 but the only "crash" was a one day drop in the stock market of 10 percent. It took three more years for it to drop by 90 percent, then rebounded, then dropped another 50 percent and did not get back to the October 1929 level until 1954. Don't be fooled by all the propaganda about a crash. The Elites will heap ridicule on you daily, scornfully asking "WHERE'S THE CRASH??" and if your definition is a one day cataclysmic event they will always be right. Don't get sucked in. Yet it is happening, in similar fashion to glaciers shaping the earths surface
The Fed is already on QE6. No one is buying Treasuries but the Fed and a few assorted morons. They just don;t talk about it. There is no other way to fund the government.
Oh god, tell me that this is happening. How lulzy would this be?
Oh wait, it's a quasi-government agency. There's gonna have plants in there asking questions they've prepped for.
Everything he said makes sense. But making sense is not the game. The Fed has to inflate away the debt. Period. When all that money currently flowing out of Euro-peon banks runs out, US treasury's must be bought by someone.
The nemesis of printer cartridge conservation will find a way to justify QE3.
this time is by crashing markets..
That is the point. They have to print. Maybe tomorrow, maybe in a year or two but they have to do it. The only alternative is deflation and the default on the debt. That is the way fractional reserve banking works.
Hi Graham- you offer yearly programs, but its a bit pricy. Id consider doing a 3 month membership if you offered it.
Oh yeah, reminds me I keep saying DOW 36k with half the population in tent city @4.6% unemployment. Then we'll get to watch our glorious leaders prance around on a stage because of our huge success. I have a hard time seeing all this end up anywhere but complete chaos.
Well if institutions are the only ones left in the market, and they are handed dump trucks of digital zeros and are allowed only to buy, not sell, then why couldn't the market keep going up on zero volume? Probably kindergarten rationale here lol. I wonder if block ops HFT's are up and running yet? LOL.
There aren't investors anymore. This is now a quasi-private market taking donations from small time gamblers. Corporate directors are the largest buyers of stock through their corporations, while at the same time being the #1 sellers of stock personally.
The market is so screwed up it is literally like working at a car dealership where you buy a car, get to drive it for a while, and then the manufacturer buys it back for twice what you paid for it. Then they let you do it over and over again.
Your analysis depends upon the U.S. Populace being educated and aware, and while some are, many are still just sheeple.
FED will do QE3 and QE4 but likely "under the covers" doing more currency swaps, buying European bonds through the ECB, using the Treasury to send billions to the IMF, etc., etc.
Besides there being too many sheeple, the FED has the complicit main stream media to ameliorate reality.
Yo eb,
what you are referring too is the Covert QE, people are waiting for the public QE...
There has been shit loads of QE's these days... Welcome to the United States of Zimbabwe
You are correct.
Public QE3 will probably appear as purchase of Fannie/Freddie MBS's, combined with some VA/FHA goodies to give the appearence that the government cares.
A political hot potato, but may be served with cream cheese and chives for the right candidate at the right time.
they print $ to short silver and gold so why the fuck does it matter. the pm's price does not reflect digital dollars period.
Deflation only matters for the little guy because your salary and yearly raises if you get one, do not keep up with the $ printing.
I don't find much comfort in predications which are predicated on the sheeple being skeptical about federal reserve rationale, when they don't even know a federal reserve exists.
And when the sheeple to find out? They've prepared for that too.
More bull shit.
I don't know if QE is coming or not. I am on the same boat as everybody else. However, I am not foolish enough to believe that the Fed is out there looking out for me (full employment and low inflation). The FED is a private institution established for the benefit of BANKS. They will do whatever they need to do to help the BANKS which are in bad shape. If the banks need liquidity, they will figure a way to spin it and they WILL get done (printing). Government won't stand in the way, as they need all the inflation that they can get.
If the FED prints, it is out of DESPERATION even if all the data points the other way.
xela2200 - you are correct. the banks ARE IN DESPERATION MODE. cutting bonuses wasn't to placate the occupy wall street crowd. it was to placate investors and attempt to 'beat estimates'. and they know, give up a little today and DOUBLE DOWN for next year. and the only way that happens, with home prices still falling (reality statistics) and unemployment still DRASTiCALLY rising, bennie is going to have to print and print big time. watch.
the data points the other way because it is manipulated and the manipulators know how much and how well better than we do.
it's all toast. they know that.
The public is not outraged at QE. In fact, they love it. It's only in the econo-blogosphere that QE is hated. Americans like European QE too.
"The public is not outraged at QE. In fact, they love it."
.............................
If you stopped 100 people at random on any mid sized town Main St in America, then asked them to define Fed QE, not 5 out of the 100 could give a credible explanation.
It isn't that most of the people don't want to know, it isn't that they are stupid, it's that they just don't care enough to start the long journey of delving into the murky world of finance/economics.
I had a short discussion with a HS teacher (math) a few days ago. She advised me that her salary has remained the same for the last four years. I told her that she was incorrect and that her salary had declined for the last four years due to her purchasing power declining due to inflation in food, gas, etc. She said "yeah, but I don't look at it that way"... End of conversation.
How many here slept through econ 101?
The public is so stupid that they probably think "QE" is the company that made their toaster.
"QE...We Bring Monetary Fraud to Life!"
It used to be, "Paperwork is our most important product".
I find myself agreeing with you that the reasons are there for QE3 not to take place. But when you cosider the fucking puppet monkey that sits in the White House right now, he will do anything to get re elected, so that is why I believe there will be a QE3 sometime this year!
Monkeys are smart.
monkey is not nice. he's white. sorry. he's white. she's black yes, but he's white. can't we find something else? like orangatang?
No, those are orange and have one hell of a left hook.
the communist parentless mulatto from nowhere