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–The Fed keeps increasing their overnight and term lending, as well as providing a monthly POMO of $60 billion.
-These stop-gap measures will not solve the real problems; the U.S. government is consuming more than 100% of the world’s available credit. Thus, longer-dated bond purchases in permanent operations (QE) need to take place forever (and very soon).
-The fact that the USD is holding up as well as it is tells me that there is still confidence in this system. The other central banks will have to ramp up their stimulus as well.
-Income-generating assets will be supported here. The only two concepts that will destroy this current scheme are a loss of confidence of the stimulus programs and higher inflation growth.
-If there is higher inflation or a loss of confidence, assets such as stocks, bonds, and real estate would suffer, while commodities would benefit. Essentially, it would result in a reversing of the market performances over the past decade.
-The global investing pool gets excited at the prospects of more QE. I know I do, as it helps support the prices of my assets. The QE programs have gone on for about 11 years now, so betting that confidence will crumble soon is hoping for an outlier event.
-Higher inflation will be the result of a loss of confidence, so they are both related to one another.