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The End Of QE3, Trouble Ahead For The Bulls?
Submitted by Michael Pollaro via Acting-Man blog,
QE3 Is Coming to an End
The Federal Reserve’s latest asset purchase program, QE3, is coming to an end. What was once an $85 billion a month program, one in which at its peak had been goosing the financial markets and economy at an annual rate of $1.0 trillion – and over its 27 month life will have pumped $1.7 trillion of money into the economy – is going to zero. Given the outsized impact QE has had on the growth of U.S. money supply and thus the U.S. economy, we say investors take note, especially those furthest out on the risk curve, because what was once your primary tailwind could soon become your greatest headwind.
Here’s why…
Recapping the tenets we presented here, here, and here, once an economy is subjected to a bout of monetary inflation, whether that be via direct central bank money creation or via money (and credit) creation by the fractional reserve banking system, an unsustainable, artificial economic boom is born, whereby malinvestments (bubbles if you like) are created that sooner or later must be liquidated. And whether that bust takes the form of a hyperinflationary bust or a deflationary bust, bust we will get.
The form the bust takes will depend on the course of the inflation. If the central bank/banking system pursues an inflationary course, by throwing continual and importantly ever larger doses of money (and credit) into the economy, the bust will take the form of a hyperinflationary bust – a collapse in the value of the currency and with that a breakdown of the entire economy. If instead the central bank/banking system ends its money creation activities or even moderates that increase in a material way, the bust will take the form of a deflationary bust – a healthy liquidation of the malinvestments made during the boom and with that a commensurate fall in the prices of those same malinvestments.
Austrian Business Cycle Theory (ABCT) in a nutshell.
Thus, when an economy is subjected to a bout of monetary inflation, investors can enhance their performance by correctly positioning their portfolios on the right side of the boom-bust cycle. Though easier said than done, one should buy claims to the malinvestments of the boom; i.e., when the money supply is surging; then sell those same claims after the growth in the money supply peaks and begins to head down. Importantly, the bigger the bout of monetary inflation, the more important it is to be positioned on the correct side of the boom-bust cycle. The reason is simple – lots of monetary inflation means lots of malinvestments in the economy and financial markets. Indeed, correct positioning is even more important on the downside of the boom-bust cycle. You see, booms tend to develop slowly. Busts, complicated by the distortions created during the boom, more often than not do anything but.
Now, as we first presented here and update for you below, we have one heck of a boom-bust cycle in train. Indeed, what we have termed the Bernanke Risk-On Boom – Bust-to-Be is even more grand than the boom-bust cycles that gave us the Tech Boom-Bust and the Housing Boom-Bust turn Credit Bust turn Great Recession. Defined by how we measure inflation cycles – by the year-over-year rate of change in our broad money supply metric TMS2, cycle trough to trough – here is how the Bernanke Risk-On Boom – Bust-to-Be stacks up through September 2014 …

Chart by Michael Pollaro/Forbes
The remainder of the article can be read at Forbes here:
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End of QE3 just signals the start of QE4.
In Rushian,
Plus ce change, plus ce meme chose.
This article is wrong. QE is not going to zero.
The Fed is still "reinvesting" all MBS principal payments, profits and maturing debt of its portfolio into new asset purchases. This amounts to billions per month in never ending "QE"
Yep. Wait for the government-paid trolls to start junking you. Officail "QE" is very much bullshit.
In fairness the stock of the printed cash now stays "contant" and the flow isn't of anything new, it's just recycled cash.
So yes QE is still around because they haven't liquidated any of the existing balance sheet, but they also aren't adding anything new. They are replacing what once was with what now is.
I'm split of if that means QE is still here.
Thoughts?
BTFD'ers on ZH are about the most pathetic of creatures. Taking part slamming the FED and QE while simultaneously begging for more.
Hypocrite doesn't even come close.
all illusion to distract you from their transfer of wealth.
wealth you earned(you didn't earn that) to the them(enemy).
simple, just like our 2 party scam...
discussing fed policy is like d vs r.
don't fall for it...
100 yrs and counting.
they will take it all.
they are sociopaths that will not be happy til you have nothing.
predictable and tic toc drip by drip b/4 your lying eyes...
You mean one party scam.
Translation : plus que ça change, plus que c'est la même chose. English version : the more things change, the more they don't. And by the way, it's French.
Boris is know french! But is from song by great Canadia band RUSH, thus is calling RUSHian!
First we will go through a deflationary period(stuff you need won't be cheaper, the velocity of money will just slow), and that will render most banks insolvent. Since the fed only cares about goosing asset prices, not the real economy, they will just fire up the printing presses again. In my opinion, it will too 100 bil a month, maybe as much as 150. They will also never raise rates by a meaningful amount, as this would make govt debt unserviceable. Eventually this will lead to hyper inflation. Could be many years away, but it is inevitable. Watch Japan, they will be first.
There are fundamentally only two reasons why velocity slows;
1) reduced economic activity/demand or
2) people stop using that particular type of "money"
Given that there are still 7+ billion people on this rock competing for a better standard of living and all the real resources that make that possible, I still see plenty of demand. Printing receipts for claims on goods and services does nothing to impact the actually creation of real goods and services if the resources/energy are simply not available.
Same as it ever was...
I think the Yen is the USD as long as all Western central banks are cooperating to prop up the USD peg system. I suspect that if the Yen goes first, everything else will follow within days, if not hours. There will not be much in the way of time lag. You probably won't even notice the Yen dropping that hard vs other paper. You will just see high prices at stores and no inventory everywhere.
You might be hitting the nail right on. Got gold?
It will be the start of the real fun when the banks start calling in loans from things like stock buy-backs. Then we'll see the FED start REALLY throwing money at the disaster they created.
I pretty much agree Carl. Whether Hyperinflation happens or not IM not sure but if it does come its probably next decade
I'm just wondering if the Fed banksters will let markets flail for a week or 2 to make the muppets beg them to be saved, or if they just link up QE4 to QE3 like train cars in line.
Boris is more blush when ease out small fart than central bankster is bat eye when print $4T US petro dollar. Only commonality is colonic smell.
Inhaling bankster colonic smell will test you positive for Ebola.
Please, wake the fuck up, "QE" is fucking irrelevant when certain people/corporations have access to FREE MONEY (ZIRP).
Such limited access is by definition a Let the majority eat cake monetary policy (just look at the growing wealth inequility).
We have seen such monetary experiments before, this time will be no different.
Same as it ever was...
(good to see the .gov trolls are "working" today, junk away you useless fucks)
Well I have never seen one..
These days, all you need is any one of an assortment of monetary dipshits to just say something the market likes for a 200-300-400 $billion swing
By Decree.....its whats for dinner these days.. for some anyway.
As Ian Hunter said. Violence is the only thing that will make then see sence
Sustainable? no, working? yes.....
yes very much working to maintain the status quo and enrich the real owners...
Indeed. QE itself is not the punchbowl. The central bank put and ZIRP is.
I think we have all learned by now that there is NO trouble ahead. Nothing will kill this "market"
Yep, good luck to Americans when the EBT cards fail.
Yep.
This will go on FOREVER.
Famous last words of every fool.
Q4 will be the Great Bull Run. Lotsa Bull. Sustenance in, Crap out.
Got Hopium? 1. Perception is 95% of Reality. 2. There's a Sucker born every minute.
You are prepare for severe castration!
Maybe that's a language barrier, but how can castration not be 'severe', Boris ?
Kinda like the only adjective approved for MSM use for Ebola is "deadly". No other is allowed.
SINGAPORE: "How would you like to be paid your worth in gold? Singapore-based precious metals dealer BullionStar is doing just that, by rewarding staff with the commodity as salary, and it says it is the first in the country to do so. Here is how it works: If, for example, you earn S$3,200 a month, you can choose to be paid in two gold bars each worth S$1,600. Theoretically, if you are a high earner drawing a pay of S$51,000 a month, you can choose to be paid with a one-kilogram gold bar.
Sales manager Vincent Tie is one of six employees at BullionStar who has opted to receive his salary in bullion. About 20 to 40 per cent of the 38-year-old's basic pay is given in gold. "If I save in a paper currency in a bank, the interest paid to me cannot beat the rate of inflation, so essentially I am losing purchasing power. That means that I am buying less with my wealth," said Mr Tie on why he went for the heavy metal option. BullionStar said it expects more employers to take up this practice, which harks back to the old days when gold and silver were indeed currency, and used to reward labour.
"Precious metals have served as money throughout most of history for some 6,000 years. So, staying true to this belief that we have that precious metals might once again return in some form or shape as money, it is quite natural for us to also offer our employees salary payments in gold and silver," said BullionStar CEO Torgny Persson.”
http://www.channelnewsasia.com/news/singapore/paying-people-their-worth/...
The nice thing about gold is that it does not require government sanction to have value. I can use gold to get what I want even if the government says it is not part of the money system.
In fact when ever the government tells us the price of gold they ALWAYS under value gold to over value the currency. We are better off if the government stays out of the gold business. They will never declare it to be it's true value.
Correct, and when the .gov demands confiscation, then you know you are dealing with fucking criminals.
Bustin' makes me feel good!
Sorry. I have nothing else to offer. It's all been said before.
Well, other than for one word: Bullish!
SINGAPORE: "How would you like to be paid your worth in gold? Singapore-based precious metals dealer BullionStar is doing just that, by rewarding staff with the commodity as salary, and it says it is the first in the country to do so. Here is how it works: If, for example, you earn S$3,200 a month, you can choose to be paid in two gold bars each worth S$1,600. Theoretically, if you are a high earner drawing a pay of S$51,000 a month, you can choose to be paid with a one-kilogram gold bar.
Sales manager Vincent Tie is one of six employees at BullionStar who has opted to receive his salary in bullion. About 20 to 40 per cent of the 38-year-old's basic pay is given in gold. "If I save in a paper currency in a bank, the interest paid to me cannot beat the rate of inflation, so essentially I am losing purchasing power. That means that I am buying less with my wealth," said Mr Tie on why he went for the heavy metal option. BullionStar said it expects more employers to take up this practice, which harks back to the old days when gold and silver were indeed currency, and used to reward labour.
"Precious metals have served as money throughout most of history for some 6,000 years. So, staying true to this belief that we have that precious metals might once again return in some form or shape as money, it is quite natural for us to also offer our employees salary payments in gold and silver," said BullionStar CEO Torgny Persson.”
http://www.channelnewsasia.com/news/singapore/paying-people-their-worth/...
sorry for the double post....
the site was trippin.
Whew. Thanks for the heads-up on that. I thought my old-timers was kickin' in....
Federal Tax Revenue Surpasses $3 Trillion for First Time Ever
This is no fucken Democracy this is a chop house and the sheeple are being slaughtered...Hence the reason for the open boarders. Come one come all to the land of free everything..
QE's just another word for nothing left to lose,
Nothing, that's all that Bernanke left me...
QE4 will be done in the backround
The Fed was taking some heat from some insolent folks, so they trotted out some BS about how QE would soon be ending and rates rising just to remove themselves from the spotlight....so now they can just say they tried to end it but hands are tied now its not their fault the markets became wobbly blah blah blah.
>>QE4 will be done in the backround
No, it will need to be done in a public way to assure markets.
Where is the QE4 "afterparty" happening? At LeBron's?
Maybe the Fed gotta try printing off shore like Ireland, Belgium , Bahamas?
Federal Tax Revenue Surpasses $3 Trillion for First Time Ever
This is no fucken Democracy this is a chop house and the sheeple are being slaughtered...Hence the reason for the open boarders. Come one come all to the land of free everything..
Probably just another made up gubmint lie anyway.
you mean toxic asset purchase program.
QE3 will just change names.
The Fed doesn't "buy" anything and wish people would meticulously avoid the word. Buying suggests a bargained for exchange of labor or tokens of value. The Fed literally just issues pieces of paper, electronic pieces of paper, at that, and exchanges them for overvalued shit, which it will later sell, below fair value, to the same fucking banks.
The issuing power should be taken from the banks and restored to The People, to whom it properly belongs.
Everything else is commentary.
To QE3
Bon Appetit!
$$$$$LOWING DOWN.
"Given the outsized impact QE has had on the growth of U.S. money supply and thus the U.S. economy,"
again, with this crap
QE HAS NOT HELPED THE ECONOMY
saying it enough does not make it true
Amen
At an upcoming Fed Halloween party, one pictures Yellen sitting at Ray Manzarek's keyboard, boosted by a well-placed pillow to achieve a proper arm angle, playing a dirge-like drone, while Bernanke, enveloped in Robby Krieger's spidery guitar mantra, begins to croon:
"This is The End, beautiful friend."
damn you!
WAS one of my fave Doors songs
Henceforth, each time you hear it the Beard will haunt you ...
QE3 will end no doubt, but that has nothing to do with QE ever stopping!
Anyone else nodding off waiting for De Blasio to finally come out and say "Do not worry"?
FED or ECB or BOJ will do QE of some kind, especially if the casino revenue goes down.
and the Dow is up 200 points again from the overnight low yet again
History tells me that when all the "experts" are looking for the same thing, the exact opposite tends to happen.
"The reason is simple – lots of monetary inflation means lots of malinvestments in the economy and financial markets."
Where is the evidence of all these malinvestments? If anything, business has been decapitalizing (buybacks, debt refi, minimal capex) instead of investing throughout this upcycle, which is one main reason it has been so awful for the average worker. Just don't see it.
Fed efforts have prevented collapse more than anything. If you want to characterize support of crappy investments from the LAST CYCLE as malinvestment, OK. But not like there's been a boom of obviously bad lending or investment.
So our future holds the prospect of recapitalisation during a down cycle? Is that possible?
So, bailouts (printed money with debt attached going to save poorly run companies/bussiness models and bad management and bad actors) was a "good investment"?
You stupid motherfucker.
Onward to QE4, QE5, QE6, QE7, QE8, QE9.... QE100.
- The Federal Reserve banksters.
You guys seem to think the market has discounted the end of QE. Wrong. Like you, the market is assuming QE4, thus your assertions that the FED will surprise are faulty. Surprise would be to actually end QE.
You guys are no better than any Wall Street QE junkie when all is said and done. Maybe worse, they at least aren't slamming it while secretly begging for more.
Surprise would be to actually end QE.
Exactly. It won't end. QE to infinity or until the currency dies.
like many ppl on here have stated, as well as guys lke peter schiff, they can not end qe. they just cant.
so what they will do is, come the next meeting, they will trot out some jackasses from the fed to tell us how the economy is improving dramatically and they see signs of hope, but at the same time, they are worried about other problems, more globally, and that is the reason why they will continue with qe.
that will be the reason given, so they can continue to have the stupid sheeple believe that everything is awesome in the u.s
And don't forget, cold weather is coming. Can't have QE end during inclement weather.
The Fed tried a drug that made it feel better, so they kept taking it. Then they discovered a pleasant side-effect...the drug greatly enlarged their breasts. So they upped the dosage.
A few years later, they found out that the drug caused cancer, and that they were now riddled with internal tumors...but, damn! Those titties looked GOOD! So they figured maybe they'd decrease the dose a bit, but when those wonderful breasts started shrinking, they panicked. No WAY were they going to give those up!
So they decided to change doctors, because obviously the one they had was an idiot...And this new guy DOUBLED their dosage! Whoo-hoo!
If only they weren't so TIRED all the time...but they've been losing weight, so that's good, right? (turns and admires self in mirror...) Although they're gonna have to do something about that rectal bleeding, and switch to long sleeves to cover the ulcers developing on their arms...but as long as they stick to plunging necklines...(pushes breasts together, admires cleavage...)
As the last mainline injection of heroin is injected into the comatose junkie, he suddenly jumps up, starts walking, talking and behaving normally...if only for a little while.
Pull the plug !
Let them worry !
https://www.academia.edu/8942403/The_Hysterical_Focus_is_your_friend_