Don’t call it QE; The Fed only wants to provide liquidity
I have been warning my readers that the groundwork is being set for another explosive round of global and domestic quantitative easing (QE). Why is this?
- Global economic growth remains anemic and in many areas, economic expansion is non-existent.
- Despite low unemployment, inflation is lacking.
- Bond yields are already low and look to continue falling.
These factors provide the perfect recipe for more wealth consolidation. The elites can continue to buy up the world with little concern for higher inflation levels.
In the New World Order, say goodbye to the Phillips Curve
In a sign that the U.S. Fed wants to “support the markets,” there are conversations that it may begin, as soon as early next year, to add to its asset balance sheet. The amounts some analysts are mentioning look to be about $20-25 billion/mo.
However, many in the MSM do not look at this as QE, but rather a sign that the Fed wishes to support the asset markets and bank lending facilities. Shortly after the 2pm FOMC minutes were released, members of a CNBC round table, which included CNBC’s Senior Economics Reporter and Chief Fed Shill, Steve Liesman, discussed this likelihood and they all seemed resigned that the balance sheet would begin to grow again. (Take my word for it, these people are excited at this prospect as they own many of the types of assets that will benefit).
I have been observing that Bloomberg and the other mainstream financial outlets are running cover for the Fed and are concluding that the recent stock and bond market strength has more to do with trade and budget negotiations than anything else. I am telling you that this has all to do with the change in Fed policy. If the Fed loosens, then all the other central banks can begin further easing programs as there will be less upward pressure on the U.S. dollar. The euro won’t sink further into the abyss.
When taken with the sudden rebounding growth of the ECB’s, BOJ’s, and PBOC’s balance sheets, the prospect of the U.S. Fed’s actions to add Treasuries to its balance sheet, provides investors with all the reasons they need to once again go long everything.
In hindsight, I suspect that last years’s Fed tightening was done with the intent to see how far it could go before the markets folded. The answer was clearly evident; the Fed cannot tighten anymore even though the Fed funds rate is at historic lows for this point in the asset market cycle. The Fed may try to increase the Fed funds rate once more this year, but I see that as the end of this round. Moreover, I see an increasing probability the Fed will once again grow its balance sheet in order “to provide liquidity” to the market place.
Gird your loins and be prepared, Dow 30k? How about Dow 40k?
I have been warning my readers that any asset bust would be short lived and that the central banks are going to do whatever it takes to keep prices moving north. If you are bearish on any asset sector I would advise you to reconsider.
I am positioned to take advantage of this prospect. I have a short-term cash position and a portfolio of income generating assets, including real estate and day-trade stocks, as well as my long-term gold and silver. My leverage continues to shrink. There will be many opportunities in the future. Never underestimate the peoples’ desire to sell their birthright for a bowl of soup.
Look, we may think this economy looks like a sham and is manufactured, but never underestimate in the ability of the elites to keep asset prices climbing. Imagine not having the assets and being dependent on the government. As the global economy begins to accelerate to the down side and QE begins to ramp up again, the vast majority of humanity will come out the losers. Don’t be on the losing end.
The average home owner in a nice area may be worth more as prices climb, but at the end of the day he still only owns the same house.