Quantitative Easing: Be Afraid, Be Very Afraid…

The major concern since the Fed and central banks around the world began printing unprecedented amounts of money has been inflation.

Naturally, we disagreed. We’ve been calling for low inflation and ultimately deflation since this craziness began. We also warned that no good would ultimately come of these activities. And so far, anyone that isn’t blind can see the dangers building! Today we have an even greater debt and financial bubble and it will burst, sooner rather than later.

All central banks have done is pervert the economy and the markets. The result has been greater speculation and greater bubbles. There will be a collapse more dramatic than what we saw in 2008 and 2009.

Thanks for nothing Bernanke, Yellen and company!

What could these people have been thinking?

Clearly, they were thinking more about the rich than the middle-class or poor as all unprecedented QE has done is drive up financial asset prices, not help the everyday household. Such money printing has been largely to save financial institutions that used increasingly cheap Fed-driven money to speculate in everything from risky loans to stocks to commodities to real estate to complex and very dangerous derivatives.

Now they are just doing that more than ever.

When the whole financial system was melting down (as in the early 1930s) the response was: We will save the banks and financial institutions at all costs. The Fed is, after all, not a public institution. It is owned by the banks.

But why do that? If they melt down, we can finally be rid of excess leverage and fat in the system. How can we expect banks to make good decisions in the future if they don’t fail when they make the riskiest loans in history? We could finally get into a position from which to grow again if we just exhaled and let these debt and financial bubbles burst. We’d have another great depression! And that’s exactly what they don’t want.

Pity for them, that’s what we’re going to get anyway… just ahead.

What central bankers seem to fail to understand is that you don’t get something for nothing. Surviving and growing takes constant effort, innovation and investment in the future… all of which is exactly the opposite of what we naturally strive for. We want to win the lottery; we want peace, not pain. We really do want something for nothing and we’ll go to great lengths to get it (even if, ultimately, we’re unsuccessful).

That’s what makes marketing and sales pitches so effective. They promise us great gains and results with little or no effort.

Guess what? We’ve just been sold the greatest something-for-nothing pitch in history: Quantitative Easing. And now we’re all going to pay the price: especially the ultra-rich and the financial institutions they’ve been supporting the most.

David Stockman couldn’t agree more. In fact, we delved into this topic in some detail – and explored what outcomes are most likely ahead ‑ recently in a spirited interview. Take a few minutes to watch it here.

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Harry

P.S. Charles has a few choice words of his own regarding backwards governmental programs in today’s Ahead of the Curve, as well as some good recommendations on how to position yourself financially. Check it out here…

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Categories: Banking

About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.