QE-4 Ever Starting To Become A Reality

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No one wants to be the one.  The Fed will likely continue their asset purchases through this year and probably into next.  They say tapering may begin next year, but I doubt it.

The latest excuse for not tapering was the two-week drama in the US about our budget and debt limit. 

The Fed’s policy-making committee ends a two-day meeting on Wednesday and the chances are vanishingly small that it will start to dial down the monetary stimulus right away.

The recent government shutdown in Washington and last-gasp deal to raise the federal debt ceiling have simply created too much economic uncertainty.

As a result, the usefulness of September figures on industrial output, retail sales and consumer prices as well as the Institute of Supply Management’s October manufacturing survey will be limited.

Forget that the budget and debt roil was in October and no one with an ounce of sense thought that we wouldn’t get a budget or an increase of the debt ceiling.  In spite of Zero’s rhetoric, most people are smarter than he is and knew they hyperbole was just political stupidity. 

Check out this use of language ……

Dannhauser is bullish on the U.S. economy, not least because stiff fiscal headwinds will ease next year.

But he said the Fed was likely to maintain very significant monetary stimulus until growth gets closer to pre-crisis trends. Thus a rise in short-term interest rates was unlikely until well into 2015.

Tapering and even an end to asset purchases are very different from a withdrawal of stimulus,” Dannhauser said.

The U.S. economy still has a very big hole that needs to be filled, and people like Bernanke and Yellen are very acutely aware of this point.”

You see what he’s bullish on?  He’s bullish on the fact that the Feds will continue printing throughout 2014.  This, of course, doesn’t help the economy.  It doesn’t help anything but funnel value from people who hold dollars to people who hold other assets. 

Some, however, are starting to realize this stupidity.

Many economists, while agreeing that an emergency policy response was needed in 2008, worry that since the 1987 stock market crash central bankers and governments have been too quick to ease in downturns and too slow to tighten in recoveries.

Treats are nice, but too much chocolate can make you ill.

When he was chief economist at the Bank for International Settlements, Bill White issued a series of prescient pre-crisis warnings of bubbles and imbalances that were building up in the global economy. He was politely ignored.

Now to saying what I’ve been saying for a couple of years now …..

Not least of them is that the very easy monetary conditions that we’ve seen since the crisis have basically impeded the process of deleveraging,” White said.

In the Group of 20 leading economies, government, household and corporate debt is now 30 percent greater than it was before the crisis, he said, citing BIS figures.

We haven’t actually dealt yet with the problems of the advanced market economies and in addition, with the crisis having spread to the emerging market economies, we now have a problem that is bigger than before,” White said.

And, this is the cold hard truth.  Helicopter Ben is retiring.  Why?  Because he knows what he did, and he’s not going to be the one who says stop.  Yellen, his replacement is probably to stupid to understand the mess she’s inherited.  The article goes on to discuss other central banks and their policies which promote loose money if not outright purchases like the US Fed.  No one wants to be the one. 

At some point this game has to stop.  Like White said, we’ve made things worse.  And, each round of purchases or printing makes matters even more worse.  But, the music has to stop at some point.  There is not now, nor was there ever, an exit strategy.  What the lunatics wanted was for the world to return to the economic conditions prior to the recession, but, without addressing the realities the recession should have corrected.  The fact is, if we return to the same conditions as 2007, we can fully expect the same events of 2008.  Only worse, now. 

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4 Responses to QE-4 Ever Starting To Become A Reality

  1. philjourdan says:

    <blockquoteAt some point this game has to stop.

    As Dirk indicated, it cannot. As I indicated, the only ways it can are going to hurt a lot. And no politician is willing to make that choice.

    • suyts says:

      Right, but, it will stop at some point for several reasons. Yes, it will be painful, but, the Feds can’t continually acquire worthless bonds and notes in exchange for worthless cash without natural laws being invoked. It will end one of two ways, but, it will end at some point.
      We’re building a global economy on air and vapor.

      • philjourdan says:

        And it will crumble. But that does not mean it has to stop. What will stop it is immutable laws of economics. And they will spell a catastrophe, not a soft landing. The nature of spineless politicians is they will avoid making hard decisions until the decisions are made for them. What we are seeing is a slow motion roll over the cliff.

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