[Short and sweet] Does it really matter if we get another QE?
Submitted by Phoenix Capital Research
Posted September 2, 2010
MOST OF THE INVESTMENT WORLD IS A-CHATTER WITH TRYING to discern when the Fed will announce another QE Program. When is it coming? How big will it be? How high will stocks soar when it hits? The “Big Picture” thinkers already know that regardless of what Bernanke says or promises, the END GAME for Fed monetary intervention is at hand. If Bernanke DOES announce some new massive QE 2 program the subsequent spike in equities will only last a short time before stocks enter a free-fall (Europe’s $1 trillion bailout only bought a few days worth of gains back in June).
Moreover, the announcement of a massive QE 2 program would also kick the US Dollar off a cliff, sending a huge signal to international investors that the EXTREME moves Bernanker committed during the 2008-2009 Crisis are actually ALL he knows how to do and will remain the norm rather than the exceptional measures they were promised to be. All of this would be HUGELY Dollar negative and ultimately stock negative though we might see a brief spike in equities for a few days.
In contrast, if the Fed DOESN’T announce a new QE 2 or some similar monetary intervention, we are very likely heading into another deflationary collapse similar to that of Autumn 2008. Looking at Treasuries, the bond market seems to be favoring this outcome. Indeed, if you only looked at US Treasuries you would think stocks were already in a free-fall akin to that of October-November 2008.
Thus, regardless of what the Fed does, stocks are likely to tank in the near future. The question is WHEN? Honestly, I cannot predict when Bernanke will unveil QE 2. All I can say is that it largely does not matter in the grand scheme of things. Yes, it will cause some short-term volatility. But ultimately QE 2 will simply be a catalyst that speeds up the processes that are already underway. Those processes are:
1) Systemic collapse
2) Destruction of fiat money
3) Massive loss of wealth