Video
QE3 Destined to Run Until Implosion?
The Federal Reserve's third round of bond purchases will likely have to last through 2013 until it can achieve improvement in the labor market, said Charles Evans, the president of the Chicago Fed Bank, on Monday. "I frankly think it is going to take almost a year to see the type of improvements in labor markets that I am expecting," Evans said in an interview on CNBC. Evans, a strong backer of QE3, will be a voting member of the Fed's interest-rate setting committee next year. The Fed's QE3 program does not have a set end-date. Evans said he supported boosting monthly asset purchases under QE3 to $85 billion yearly next year. At the moment, the Fed is purchasing that amount of Treasurys and agency mortgage-backed securities but $45 billion of those purchases is set to end in December when the central bank's Operation Twist plan ends. If the Fed did not take any action to boost bond purchases after the Twist plan ended, that would be a "step down," Evans said. – MarketWatch
Dominant Social Theme: Markets run on their own and central banks merely guide them.
Free-Market Analysis: The video here provides us with a succinct summary of the effects of QE2 – beyond what may be questionable impacts on labor.
The big news: The money supply will expand and as it does all sorts of assets will inflate – money metals chief among them. It is certainly possible that stock markets will continue their manipulated climb. The Dow itself has doubled since the Fed began its regime of easing and this latest variant, QE3, may continue the process, especially as it is being cast as "unlimited."
Asset inflation is not something that is about to occur ... it is already here with such ferocity that there are increasing numbers of top people speaking of a return to a formal (state-run) gold standard as the only solution.
Of course, we are on record as opposing a state-run gold solution. Any kind of state-run mandate is a form of price fixing and distorts both the economy and the product it focuses on. We're in favor of private solutions. Let the market fix the price and value of money.
The damage central banks have done to the West's larger economies should be obvious to everyone now – and we notice that all pretense of subtlety has been cast aside. The mainstream media doesn't even pretend that central banks are adjuncts to the market itself.
Now central banks – specifically the Fed – are cast as market saviors. Each misstatement of economic reality is reported as if it were unalterable insight.
We once estimated that to deal with the current "crisis," central banks would dump a full US$100 trillion into the world economy. In adding it up, we figure central banks are more than halfway there.
The Fed itself has admitted to some US$16 trillion in "loans" around the world to financial institutions in 2008 and beyond. Most of those loans have never been repaid, apparently.
Really, these numbers are impossible to comprehend. And they are a reason to be very wary when it comes to the future.
Many people – even long-time investors – don't truly "get" how inflation works. Not only is the volume of money important but also its circulation.
Right now billions – trillions, really – are trapped one way or another within metaphorical bank vaults. It is not until these funds are lent that money will circulate in earnest, causing price inflation.
Another important point is that demand stimulates lending. While articles have been written about banks not lending for a variety of reasons, part of the inflation issue involves consumer demand.
When consumers are ready to borrow, presumably banks will lend. At that point, price inflation will move up rapidly.
Of course, price inflation is with us today and is surely being understated. But that is nothing compared to what is in store tomorrow.
It really is not all that complicated, though the prognosis is anything but a happy one. Tomorrow we will face the storm that central banks are seeding today.
In the meantime, many of today's assets are almost bound to appreciate at some point ... at some level. This short video makes that clear.
(Video from TheStreetTV's YouTube user channel.)
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Posted by clark on 10/01/12 10:08 PM
Mousetrap #2:
FerFal discusses how inflation can render you unable to make house payments. :
Click to view link
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Posted by clark on 10/01/12 07:47 PM
The price fixing of houses... mark to fantasy, banks slowly leaking out shadow inventory, etc... that sure helps to increase prices.
Here's a bit more on price increases:
Megan McArdle: I'm Stuck in a Bubble and I Don't Know Why
Click to view link
Los Angeles Housing Inventory Down to Two Months of Supply
Click to view link
Does the Fed Really Control Interest Rates?
"The answer is not completely." ...
Click to view link
Why There is No Direct Correlation Between Interest Rates and Housing Prices
Click to view link
So, should the less affluent put $2,000 - $20,000 down for a broken down mobile home on a 100' x 90' lot or an old house that needs a new roof and such?
Or, is it better to get more gold and silver while renting?
Gold confiscation is a risk... . not much, imho.
Is there any possibility of a repeat of a Gordon Brown central bank selloff of gold somewhere? I doubt it.
If considering borrowing for a home, wouldn't it be wise to factor in a 20% yearly increase in the cost of living when figuring out a budget and deciding how much home to buy? The answer might be zero home?
Marc Faber says (basically) to have 25% of your assets in gold and 25% in real estate,... I keep thinking of housing as a giant income sucking device, a.k.a. a liability. Should those expected future housing costs such as repairing a furnace, or insurance cost increases, and increasing food prices and such be factored into the 25% figure for real estate?
Just highlighting and thinking out loud,... and questioning everything.
Economists Report in from Around the U.S.
"The key now is to watch and see if Bernanke's new money printing works its way into the system, or ends up in excess reserves, where it would have no impact on the economy. " ...
Absolute Money Growth versus Percentage Change in Money Growth
"Just watching absolute money growth, without reference to percentage change will not provide any clue as to whether the Fed is shrinking or expanding the capital structure it is manipulating and thus provide no clue as to whether we are headed for a downturn or Fed manipulated boom. " ...
Click to view link
Bob Murphy Still Isn't Getting It Right
"And for those who don't think that all those funds flowing into excess reserves didn't have an impact on money supply, here is the erratic quarterly money supply growth with the same May 2010 end point." ...
Click to view link
Argentinian Hot Money Hits the Shores of Miami
Click to view link
Government Default: Yes or No?
"This is a very good reason to prepare for a catastrophe, if we are lucky, or possibly several:
(1) mass inflation,
stabilization,
deflation,
depression,
and government default,
or (2) hyperinflation followed by a default. Take your pick. "
Click to view link
Gold Market Update 09/18/12
"The Fed has declared open warfare not just against the dollar and savers in general, but against the entire American middle and lower classes, who will be progressively stripped of their assets and impoverished, the better to serve the interests of the banking class and the elites at large. " ...
Click to view link
Will Uncle Sam Default? Definitely.
Click to view link
An Open Letter to the Victims of Bernie Madoff
"The default will come in a tricky fashion, most likely by the government (through the Federal Reserve) printing up new dollars that will result in the decline in the value of the currency and government securities. The way to protect yourself from this possibility is to own gold and silver." ...
Click to view link
Video: Two Men Attacking Each Other Over Cab in Manhattan
"When the price inflation comes and the government slaps on price controls and food items become scarce, these guys will be fighting over bologna sandwiches." ...
Click to view link
Five Mainstream Economists Sound a Warning
"Nothing will change Congress. Nothing will change the executive. There will be no cutback in spending until the numbers force the Great Default.
Americans will not be ready. State and local governments will not be ready.
Will you be ready?"
Click to view link
G. Edward Griffin on Quick Fixes, the Looming Great War and Loss of Elite Moral Authority
"It seems to me that probably within the next two years we will be experiencing 15, 20, 25, 30 percent and so forth. It may be much higher because I have a feeling there is a certain tipping point coming when people finally realize - and they always do - in any country where the currency is grinding down. There comes to be a point, like in Russia or in Germany, for example, when inflation was modest and then within a period of a few weeks inflation was way, way out of proportion. It was a psychological factor that made the difference. Nothing else changed except the awareness level that the money was no good. So I kind of think we are going to see similar psychological influence like that here and probably we will catch up with all the inflation that should have been in the market very quickly.
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I think the elites are prepared to plunge the world into utter chaos, if necessary, for them to maintain their control. It's not that they want to or that they intend to but they have no qualms against it if it becomes necessary. They don't really care about mankind; they look at the average working person as an asset, like cattle on a farm or a piece of livestock. They don't want to jolt the livestock with a cattle prod. It's not that they want to do that but if cattle get out of line, well, where's the cattle prod? I think that the people who are really calling the shots in the major societies and governments of the world are really pretty indifferent to the personal suffering or the personal lot of the individual citizen. They may talk a lot about it, they may give speeches about it, they may give lip service to human rights and these things but when push comes to shove, they are only concerned about one thing and that's the perpetuation of their own power." ...
Click to view link
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Posted by ghendric on 10/01/12 02:47 PM
re:"Right now billions - trillions, really - are trapped one way or another within metaphorical bank vaults. It is not until these funds are lent that money will circulate in earnest, causing price inflation."
... well, something is causing inflation! The bankers are spending it on something. Maybe they're blowing it on fast cars and blow..just sayin'... lol..
