QE3 to Infinity – What Does It Mean?

What Was The QE3 Announcement – What Does It Mean?

Here is what the Fed announced:

The central bank will buy $40 billion of mortgage-backed securities a month, and is willing to take more action if the labor market doesn’t improve, its policy-setting committee said. The Fed also extended an existing stimulus effort known as Operation Twist, under which the central bank has been selling short-term bonds and using the proceeds to buy longer-term bonds in an effort to bring down long-term rates. Officials also said they expect to keep short-term interest rates near zero until at least mid-2015, past the previous estimate of late 2014.

The double-speak at this level of economics is sometimes difficult to understand.

Here’s QE3 in a nutshell:

  • The Fed is going to buy mortgage backed securities, at $40B per month until economic conditions improves.  Reminds me of the old joke sign I once saw at work: The beatings will continue until morale improves!
  • Basically, they are going to keep printing money in order to buy these bonds.
    • These bonds are issued by the FedGov and the monies generated from them are used to finance government expenditures.
    • It’s this easy access to money that is a big reason why we’re seeing debt skyrocket.  Think about it, if someone gave you a credit card with no maximum limit, it would be pretty difficult to not keep buying things.
  • They’re also going to keep interest rates at 0% until at least 2015.
    • These low interest rates are going to prevent other countries from loaning us money, because their ROI is too low, especially when they’re being paid back in dollars that are worth less.
  • It appears that the whole plan by the Fed is to create another real estate bubble and drive the prices of houses up.
  • This plan completely ignores the core issues of the economy and allows federal politicians to keep spending money.  And they will keep spending it until the economy can no longer support the debt and it all comes crashing down.  Then they’ll say, “I didn’t know this would happen” or “It’s So-and-So’s fault” or “We did the only thing that could have been done.”  Whatever the excuse, it’ll be a lie.
  • In my quick post on QE3 on Sept 13th, I forecasted that the US credit rating was going to be downgraded.  Now we see that one day after QE3 is announced, that has already started.
  • For those of you that have investment in US Dollars, you need to consider moving them to safer assets.  You’ll need to do your own research on this though, as all I can recommend is owning physical gold and silver, but there are other options available to you.

Be sure to listen to my podcast, Episode 128 – What is Hyperinflation, where I explain more of this in detail and explain what hyperinflation is and how it’s created.

 

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One Response to QE3 to Infinity – What Does It Mean?

  1. Pingback: Episode 128 – Hyperinflation Series Part 1 – What Is Hyperinflation? | The Preparedness Podcast

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