August 24, 2012
By gpc1981
Listen
up Mainstream Financial Media, the Fed is not going to announce QE 3. You’ve
been running the same tired stupid story after every single FOMC meeting since
May 2011, desperately trying to spin everything the Fed says into a call for
more QE.
The
fact of the matter is that only a handful of Fed members have called for more
QE. They are Charles Evans and Bill Dudley, both of whom represent financial
centers (Chicago and New York). These guys want QE Infinity because they
represent the banks and could care less about the average American. Heck,
Dudley even went so far as to suggest inflation was under control because iPads
are getting cheaper… at a time when food prices were at all time highs!
Those
folks have been clamoring for QE all along. This is nothing new.
Let
me explain why QE 3 is not coming and why your desperate feeble attempts to
spin every Fed statement into a call for more QE is going to bite you in the
tail.
The
Fed cannot announce QE 3 because:
1)
Food prices are already exploding higher towards records
2)
Gas prices are sharply up
3)
Inflation is actually much much higher than CPI claims
4)
The stock market is at or near four year highs
Those
are the obvious reasons that anyone with a working brain could figure
out. Now let’s explain the more significant reasons that someone who actually
grasps how the financial system works knows about.
If
the Fed announced QE 3, or decided to monetize everything in sight, the bond
market would implode. Every time we’ve had QE, interest rates have risen.
More QE now after we’ve already had QE 1, QE lite, and QE 2 would signal that
the Fed is willing to monetize everything under the sun. The end result would
be an absolute catastrophe (the bond market dwarfs the stock market in size) as
bonds would collapse, sending interest rates through the roof.
This
in turn would take down many corporations as they’d be forced to default on
their debt payments. It would also destroy the US economy as credit card
defaults, mortgages, student loans, etc would be defaulted upon.
So
no QE, guaranteed.
There’s
another reason QE isn’t coming. QE sucks Treasuries out of the financial
system. Treasuries are the senior most assets against which banks make their
trades. Consider that the top four banks in the US (JP Morgan, Goldman Sachs,
Bank of America, and Citirgroup) only have $7.12 trillion in assets
backstopping over $200 TRILLION in derivatives.
When
the Fed “monetizes” debt it is in fact pulling assets out of the
system (swapping out Treasuries and other assets for cash). With over $224
TRILLION in derivatives outstanding this is the LAST thing the Fed wants.
Indeed,
Bernanke has all but admitted this recently, saying “I assume there is a
theoretical limit on QE as the Fed can only buy TSYs and Agencies… If
the Fed owned too much TSYs and Agencies it would hurt the market.“
Why
would it hurt the market? Because the banks NEED these assets . And QE
takes them out of the system.
Trust
me… Bernanke knows about this situation in the financial system. This
is why he propped up the four TBTFs as well as Fannie/ Freddie and AIG while
letting just about everyone else go under: if these firms collapsed it would
implode the system.
So
QE is not coming. That’s a fact. You can spin the Fed’s language however you
want but you’re just making stuff up. You’ve been wrong about QE 3 for over a
year now. And you will remain wrong. All you’re doing is propping up stocks
you’re your propaganda.
On
that note, I’ve already alerted my Private Wealth
Advisory subscribers
to a handful of investments that will explode higher as the markets realize
this.
To
find out what they are… and start receiving my bi-weekly investment research
reports including real time “buy and sell” alerts via email, you need to take
out a subscription to Private Wealth
Advisory. To do
so…
Graham
Summers