Quantitative Easing

Financial guru Jim Rogers: The financial crisis of 2008 was just a warm-up act for the one that’s coming

by Lee on June 12, 2011 17:41 pm · Comments/Link

Who better than Jim Rogers to know when the system is about the crash than a man whose interests are allied with the Grand Puppetmaster George Soros?

Rogers appeared on CNBC and had no good news:

“The debts that are in this country are skyrocketing,” (Rogers) said. “In the last three years the government has spent staggering amounts of money and the Federal Reserve is taking on staggering amounts of debt.

“When the problems arise next time…what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around.”

Rogers peers into his crystal ball and sees a very grim future for the world’s largest economy:

“The U.S. is the largest debtor nation in the history of the world,” he said. “The debts are going through the roof. Would you keep lending money to somebody who’s spending money and not doing anything about it? No you wouldn’t.”

The pound sterling lost 90% of its value when it was no longer the world’s reserve currency, he said, and the dollar will, too. In keeping with his philosophy he said he owns the U.S. dollar and is waiting for a rally. “If it doesn’t happen I’ll have to sell and take my losses.”

He called Federal Reserve Chairman Ben Bernanke a “disaster” who has “never been right about anything” since he’s been in Washington. “I hope he doesn’t come back with QE3 but that’s all he knows. The only thing he knows is to print money.”

He predicted that after the Fed ends its quantitative easing program, known as QE2, this month, it may come back under another name.

“They’re gonna bring it back because [Bernanke will] be terrified and Washington will be terrified,” he said. “There’s an election coming in November 2012. Washington’s gonna print more money.”

You’d think we’d be elated to find out that one of the world’s most successful investors agrees with us. But somehow it’s not working out that way.


Source: CNBC

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Fed’s Fred Fisher: U.S. Debt Situation at Tipping Point

by Mark on March 22, 2011 8:58 am · Comments/Link

Dallas Federal Reserve Bank President Richard Fisher said on Tuesday at the University of Frankfurt that the U.S. debt situation is at a “tipping point,” and “if we continue down on the path on which the fiscal authorities put us, we will become insolvent. The question is when.”

Here are some other quotes the policymaker made in this speech.

“The short-term negotiations are very important. I look at this as a tipping point.”

“The Fed has done enough, if not too much, and we should do no more.. In my opinion no further accommodation is necessary after June either by tapering off the bottom of treasuries or by adding another tranche of purchases outright.”

“We are seeing speculative activity that may be exacerbating (price rises in ) key commodities such as oil.”

“The real question is when do we stop accommodation. We need to continue to discuss the exit policy… but before you can tighten you have to stop accommodating,”

Will anybody listen? Will anyone act?

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Waiting for The Big Splatter

by Mark on February 18, 2011 8:31 am · Comments/Link

Gonzalo Lira has written a great story today on the state of the United States.  Not because it prevents any new facts about the ever-rising deficit and the inevitability of continued quantitative easing, but because it tells the story in such a clear way that anyone one can understand why we are not getting out of the mess we’re in. Go to Lira’s blog for whole article, but we just had to print his brilliant conclusion her:

The American people have thrown in the towel. They collectively realize that the shit is gonna hit the fan big time. So in this little window of time before The Big Splatter, everyone’s pretending that nothing’s wrong, everything’s fine—we’re doing hunky dory, couldn’t be better. Any bad news—like the monster deficit? Ignored, blatantly.

You know those gamblers in Vegas, who go there and blow their house on the black jack tables? And then they go around town buying hookers and blow left and right, partying hard until the dawn, acting as if they didn’t have a care in the world? At least until the night runs out?

That’s the United States.

The American people—collectively, irrespective of political parties—blew their country like a gambler blows his house on the black jack tables. Whether it was on unsustainable entitlement programs, or unwinnable (and illegal) (and pointless) wars, or foolishly short-sighted tax policies, or crony corruption, or demands for absurd services—it doesn’t matter, the result is the same:

The American people collectively blew their country. So now, everyone’s pretending that everything’s fine, while they wait for the shit to hit the fan.

Everybody with any sense knows that The Big Splatter is on its way—everyone knows there’s nothing that can stop it. So when bits of bad news crop up—like the revised deficit numbers—Americans are placid as Hindu cows.

And why not? These deficit numbers are nothing! Americans all know that it’s going to get much, much worse. They all know that there’s no sense worrying about the little milestones on the road to hell.

They all know that they’re waiting for The Big Splatter.

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Understanding QE2 — and what could go wrong

by Mark on November 3, 2010 7:06 am · 5 comments

qe2 - quantitative easingThe fed is about to announce the size of their quantitative easing efforts. And it comes with great risk. I get asked a lot just what is QE2, and today I ran across an article that explains it very well in plain, layman’s language. Pass it along to any of your friends who need a clear understanding of what quantitative easing is, and what could go wrong with this desperate attempt to keep us from fiscal ruin.

The Federal Reserve is about to take a huge risk in hopes of getting the economy steaming along again. Nobody is sure it will work, and it may actually do damage.

The Fed is expected to announced today that it will buy $500 billion to $1 trillion in government debt, and drive already low long-term interest rates even lower. The central bank would buy the debt in chunks of $100 billion a month, probably starting immediately.

Economists call it “quantitative easing.” It gets the name “QE2″ — like the ship — because this would be the second round. The Fed spent about $1.7 trillion from 2008 to earlier this year to take bonds off the hands of banks and stabilize them.

Here’s how it’s supposed to work this time: The Fed buys Treasury bonds from banks, providing them cash to lend to customers. Buying so many bonds also lowers interest rates because demand for Treasurys leads to higher prices and lower yields. Interest rates are linked to yields. Lower rates encourage people to borrow money for a mortgage or another loan.

At the same time, lower interest rates make relatively safe investments like bonds and cash less appealing, so companies and investors take the cash and buy equipment or other investments, like stocks. The S&P 500 takes off and Americans celebrate with a shopping spree. Businesses see a rise in sales and begin hiring again, and a virtuous cycle of more spending and more hiring ensues.

But many analysts and even supporters of the plan see dangers. It could make the weak dollar even weaker and lead to trade disputes with other countries. It could lead bond traders to believe that higher inflation is on the way, and they could derail the Fed’s efforts by pushing rates higher. Many investors argue that it may create bubbles as hedge funds and other speculators borrow cheaply and make even bigger bets on stocks, commodities and markets in developing countries like Brazil.

“It’s a desperate act,” says Jeremy Grantham, co-founder of the investment firm GMO. Grantham says it’s a clear message from the Fed to the rest of the world: “The U.S. doesn’t care if the dollar weakens.”

Here is a look at the ways the Fed’s strategy could backfire:

Read the whole article here: AP

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