QE3 - what will it do?
- Thread starter knightm
- Start date
Dont know, await the answers, experts say"
http://en.wikipedia.org/wiki/Quantitative_easing
http://investorplace.com/2012/09/what-does-qe3-mean-for-investors/
Peter
http://en.wikipedia.org/wiki/Quantitative_easing
http://investorplace.com/2012/09/what-does-qe3-mean-for-investors/
Peter
Gold to $2500 by May.
Dip to $1920 by Oct.
Off to $3200-3500 by Dec.
Dip to $1920 by Oct.
Off to $3200-3500 by Dec.
In which year(s)?
Here's the video that started a war on the Middle Class week. Watch it while you can before Communications Komissar Stephen Conroy has it banned.
http://www.federalreserve.gov/mediacenter/media.htm
From Dan Denning:
--First off, the Bernanke did not announce Quantitative Easing three, or QE3. It announced open-ended money printing, forever and ever amen! The Fed will purchase US$40 billion a month in mortgage backed securities (MBS) and continue 'twisting' its portfolio of US Treasury bonds and notes to longer maturities. All up, you're looking at around $85 billion a month in bond purchases.
--Bond purchases, as you know, are loans. You, the creditor lend money to the borrower. The money has to come from somewhere, unless it isn't real money. In this case, the Fed will create money to buy MBS from banks and secondary mortgage lenders. Its open-ended purchases of US government debt will also be financed by money that does not yet exist.
--It didn't take markets long to figure out how inflationary the Fed's new policy may be. Egan Jones, the only truly independent credit rating agency going around, cut the US government's credit rating from AA to AA-. Earlier in the week, Moody's warned it could downgrade the US again if the Congress and the President didn't steer the US away from the looming 'fiscal cliff,' where taxes will rise at the end of the year.
--A downgraded credit rating works against Ben Bernanke. It pushes interest rates up on US government debt, making it more expensive for the US to finance its world-class deficits. But since the Fed intends to provide all that financing anyway, if it must, then maybe Bernanke doesn't care what Moody's or anyone else thinks of the US credit rating.
--Bernanke wants a weaker US dollar. He seems to believe that if he drives the dollar down low enough, he'll make US labour competitive with global labour, leading to a turnaround in the American unemployment rate. In order to save the American economy, it will be necessary to destroy the dollar!
From Greg Canavan:
--So the Fed is simply giving us more of the same slop it's served up for decades...the same policies that have brought us to the brink of economic ruin. Now, as the inflated global credit structure collapses back into itself, the Fed has to run to stand still to monetise the collapsing debt structure.
--That this policy will become an economic disaster is not in doubt. History will not be kind to Bernanke and the central banking fraternity. This is an insane policy designed to enrich the bankers and help monetise ongoing US$1 trillion plus Federal deficits. (Don't forget the Fed is still monetising $45 billion per month in long term Treasury securities, as part of 'Operation Twist'.)
--But Bernanke does it all under the cloak of the 'dual mandate' and his desire to achieve maximum employment. In the press conference following the Fed statement, a reporter asked Bernanke exactly how this would benefit 'Main Street', given that the past attempts hadn't really done anything for 'the people'.
--His response was extraordinary. This guy has economic theory back-to-front. As we said, insane...plotless. Here's what he said:
--When the Chairman of the Federal Reserve Board holds such a view about wealth creation, we're all doomed. Seriously...this is not good.
--That Bernanke has now confirmed himself as a monetary lunatic of the highest order, who deserves little or no respect, is one issue. The other is what do you do about it.
--Owning precious metals is a good place to start. Storing your hard won wealth in the ancient metal while Bernanke tries to fix things is a pretty safe bet as far as we can tell.
--But what else? Should you assume Bernanke's actions will have a positive effect on markets around the world?
--Well, the Fed's announcement certainly put a rocket under US shares last night. His promise to maintain low rates until at least 2015 and to keep rates low even if a recovery takes hold (it won't) emboldened speculators further. But wasn't all this already expected? Hasn't the market been buying in anticipation of QE3 for months?
--Yes it has. So we wouldn't get too excited about this rally just yet. If we see follow-through buying next week then we might concede the market has evolved into a higher realm of consciousness...where fundamentals don't matter and wealth creation starts not with ideas, hard work and innovation, but with higher stock prices to encourage demand for the excess of 'stuff' already on the market.
--By the Fed monetising mortgage and government debt and thereby encouraging consumption, the current broken global economic system of US excess consumption gets another lease of life. This should increase the US trade deficit and increase the flow of US dollars into the international financial system.
--It will give all those nations who don't want a stronger currency vis-a-vis the US dollar an opportunity to print more money to keep their currencies 'competitive'. This could provide another short-lived injection of credit-heroin into the addict, which in turn will result in only greater withdrawal symptoms down the track.
--And what about Australia, which doesn't 'manage' its currency? Apart from the speculative buzz, it gets no help at all from Bernanke's idiocy. So the Aussie dollar strengthens right at the time when our export sector desperately needs it to weaken...as it should given the recent collapse in bulk commodities.
--But in the Bernanke era the market never does what it 'should' - or what you would expect based on fundamental, rational analysis. Which makes it a very dangerous market indeed.
--If you're wondering what to do, our suggestion is to do nothing. Sit back and observe. See what next week brings. The market could well realise over the weekend that Bernanke is the problem, not the solution. It might look around and see a simultaneous global downturn looming, and panic in the other direction.
--The truth is no one knows what is going on. If the market were an animal it would resemble Dr Dolittle's pushmi pullyu...deteriorating economic fundamentals pushing one way and Bernanke pulling another.
http://www.federalreserve.gov/mediacenter/media.htm
From Dan Denning:
--First off, the Bernanke did not announce Quantitative Easing three, or QE3. It announced open-ended money printing, forever and ever amen! The Fed will purchase US$40 billion a month in mortgage backed securities (MBS) and continue 'twisting' its portfolio of US Treasury bonds and notes to longer maturities. All up, you're looking at around $85 billion a month in bond purchases.
--Bond purchases, as you know, are loans. You, the creditor lend money to the borrower. The money has to come from somewhere, unless it isn't real money. In this case, the Fed will create money to buy MBS from banks and secondary mortgage lenders. Its open-ended purchases of US government debt will also be financed by money that does not yet exist.
--It didn't take markets long to figure out how inflationary the Fed's new policy may be. Egan Jones, the only truly independent credit rating agency going around, cut the US government's credit rating from AA to AA-. Earlier in the week, Moody's warned it could downgrade the US again if the Congress and the President didn't steer the US away from the looming 'fiscal cliff,' where taxes will rise at the end of the year.
--A downgraded credit rating works against Ben Bernanke. It pushes interest rates up on US government debt, making it more expensive for the US to finance its world-class deficits. But since the Fed intends to provide all that financing anyway, if it must, then maybe Bernanke doesn't care what Moody's or anyone else thinks of the US credit rating.
--Bernanke wants a weaker US dollar. He seems to believe that if he drives the dollar down low enough, he'll make US labour competitive with global labour, leading to a turnaround in the American unemployment rate. In order to save the American economy, it will be necessary to destroy the dollar!
From Greg Canavan:
--So the Fed is simply giving us more of the same slop it's served up for decades...the same policies that have brought us to the brink of economic ruin. Now, as the inflated global credit structure collapses back into itself, the Fed has to run to stand still to monetise the collapsing debt structure.
--That this policy will become an economic disaster is not in doubt. History will not be kind to Bernanke and the central banking fraternity. This is an insane policy designed to enrich the bankers and help monetise ongoing US$1 trillion plus Federal deficits. (Don't forget the Fed is still monetising $45 billion per month in long term Treasury securities, as part of 'Operation Twist'.)
--But Bernanke does it all under the cloak of the 'dual mandate' and his desire to achieve maximum employment. In the press conference following the Fed statement, a reporter asked Bernanke exactly how this would benefit 'Main Street', given that the past attempts hadn't really done anything for 'the people'.
--His response was extraordinary. This guy has economic theory back-to-front. As we said, insane...plotless. Here's what he said:
--When the Chairman of the Federal Reserve Board holds such a view about wealth creation, we're all doomed. Seriously...this is not good.
--That Bernanke has now confirmed himself as a monetary lunatic of the highest order, who deserves little or no respect, is one issue. The other is what do you do about it.
--Owning precious metals is a good place to start. Storing your hard won wealth in the ancient metal while Bernanke tries to fix things is a pretty safe bet as far as we can tell.
--But what else? Should you assume Bernanke's actions will have a positive effect on markets around the world?
--Well, the Fed's announcement certainly put a rocket under US shares last night. His promise to maintain low rates until at least 2015 and to keep rates low even if a recovery takes hold (it won't) emboldened speculators further. But wasn't all this already expected? Hasn't the market been buying in anticipation of QE3 for months?
--Yes it has. So we wouldn't get too excited about this rally just yet. If we see follow-through buying next week then we might concede the market has evolved into a higher realm of consciousness...where fundamentals don't matter and wealth creation starts not with ideas, hard work and innovation, but with higher stock prices to encourage demand for the excess of 'stuff' already on the market.
--By the Fed monetising mortgage and government debt and thereby encouraging consumption, the current broken global economic system of US excess consumption gets another lease of life. This should increase the US trade deficit and increase the flow of US dollars into the international financial system.
--It will give all those nations who don't want a stronger currency vis-a-vis the US dollar an opportunity to print more money to keep their currencies 'competitive'. This could provide another short-lived injection of credit-heroin into the addict, which in turn will result in only greater withdrawal symptoms down the track.
--And what about Australia, which doesn't 'manage' its currency? Apart from the speculative buzz, it gets no help at all from Bernanke's idiocy. So the Aussie dollar strengthens right at the time when our export sector desperately needs it to weaken...as it should given the recent collapse in bulk commodities.
--But in the Bernanke era the market never does what it 'should' - or what you would expect based on fundamental, rational analysis. Which makes it a very dangerous market indeed.
--If you're wondering what to do, our suggestion is to do nothing. Sit back and observe. See what next week brings. The market could well realise over the weekend that Bernanke is the problem, not the solution. It might look around and see a simultaneous global downturn looming, and panic in the other direction.
--The truth is no one knows what is going on. If the market were an animal it would resemble Dr Dolittle's pushmi pullyu...deteriorating economic fundamentals pushing one way and Bernanke pulling another.
I would not be surprised to see such a move over the next 15 months as you describe. With no set QE for speculators to front run (e.g. it's now just unlimited until desired effect reached) I can see a situation where they just start piling into Gold as it rises taking Gold into a parabolic/runaway move which peaks within the next 1-2 years.
ha! i thought that was obvious.
why? so the trolls can hold me accountable if it doesn't eventuate?
i call a sharp rise, one final supression and then it's off.
it will then be used to finally back these IMF SDRs.
So, you agree, it will happen though ?
QE = a sexy way of saying we are printing money and inflation will save us....
No?
USD for sure. don't ask me to play Mr Forex.
Yep, it certainly does.
Got this email today:
Comment from Ross Greenwood .
In USA today:
Lesson # 1:
Why the U.S. was downgraded:
* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $38,500,000,000
Let's now remove 8 zeros and pretend it's a household budget:
Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts: $385
Got It ?????
OK, now Lesson # 2:
Here's another way to look at the Debt Ceiling:
Let's say, you come home from work and find there has been a sewer
backup in your neighborhood ... and your home has sewage all the way up to
your ceilings.
What do you think you should do?
Raise the ceilings, or pump out the (ummmm) "effluent"?
Lesson # 3 :
in Australia today
Right now the Federal Government is at pains to tell everyone - including us,
the mug-punters, and the International Monetary Fund, that it will not exceed
its own, self-imposed, borrowing limits.
How much? $200 billion. And here's a worry.
If you work in a bank's money market operation; or if you are a politician,
the millions turn into billions and it rolls off the tip of the tongue a bit
too easily. But every dollar that is borrowed, some time, has to be repaid.
By you, by me and by the rest of the country.
Just after 5 o'clock tonight I did a bit of math for Jason Morrison (Sydney
radio presenter). But it's so staggering its worth repeating now.
First thought: Gillard, Swan, Wong, and before that Rudd, and all of the Labor
Cabinet call these temporary borrowings, a �temporary deficit�.
Remember Those Words : TEMPORARY DEFICIT.
The total Government debt will end up around $200 billion.
So here's a very basic calculation... I used a home loan calculator to work
it out..... it's that simple..
$200 billion is two hundred thousand million dollars.
The current 10 year Government bond rate is 4.67 per cent. I worked the loan
out over a period of 20 years. Now here's where it gets scary .... really
scary.
The repayments on $200 billion come to more than one and a quarter billion
dollars - every month - for 20 years. It works out that we - as taxpayers - will
be repaying $15.4 billion in interest and principal every year .. $733 for
every man woman and child - every year.
The total interest bill over the 20 years is - get this - $108 billion.
Remember, this is a Government that just 4 years ago had NO debt. NO debt.
In fact, it had enough money to create the Future Fund, to pay the future
liabilities of public servants' superannuation, and it had enough to stick
$20 billion into the Building Australia Fund .....
A note was sent to me, which explains that the six leading members of the
Government, from Ms Gillard down, have a collective work experience of 181
years, but only 13 years in the private sector.
If you take out of those 13 years the number that were spent as trade union
lawyers, 11 years, only two years were spent in the private sector.
So out of those 181 years:
- no years spent running their own business
- no years spent starting their own business
- no years spent as a director of a family business or a company
- no years as a director of a public company
- no years in a senior position in a public company
- no years in a senior position in a private company
- no years working in corporate finance
- no years in corporate or business restructuring
- no years working in or with a bank
- no years of experience in the capital markets
- no years in a stock-broking firm
- no years in negotiating debt facilities with banks
- no years running a small business
- no years at the World Bank or IMF or OECD
- no years in Treasury or Finance.
But these people have plunged Australia into unprecedented debt.
Well, in a way you can't blame them.
It's clear the electorate did not do their homework, because the Government
is there by right.
Ah, but they are Labor and people vote for them because Labor is good for
the working family - right???
LOL. Should have put a
I have no idea. I was one of those (extremely uneducated) who was scoffing when gold was about $350 and $1000 was being predicted. I had no reasoning for or against, only opinion.
Maybe this time I should catch the train and go along for the ride.
gold will move $500 a day up and down soon. buy and hold tight, sell when its a today tonight mania " buy now or be locked out forever".
Humm, so can i ask do those who are big on gold have money in and if so, without being rude, a lot, a heap or little a lot being over $10k, a heap being over $50k and little under $10k.
I ask as if I was that confident I would convince wife to move the $250k we have in MISA into Gold. Obviously I am not.
Thanks Peter 14.7
Silver actually...... multiples of "a heap"..... real stuff, not ETFs. Does that answer your Q?
Yeap thank you.
So why silver and not gold. Can I assume it is simply better or less volatile.
Peter
LOL.... No you can't!
Silver is actually far more volatile than gold.... and since you are asking me that question, I wouldn't suggest trying to convince the wife anytime soon!
Just like property investing, buying into commodities or in this case more specifically, precious metals, is multi-faceted and rather complex. So, I ask you, why gold and why now?
Why not silver, corn, rice, oil, pig bellies...... why not yesterday or tomorrow????
I know why Ag, why yesterday, today & tomorrow..... its rather complicated, yet simple at the same time (if that makes any sense)
Edit: OK, I feel a little bad for not giving one big reason. So here goes. Silver is currently running at a ratio greater than 50:1 with Gold. Is this normal? Is this likely to be the enduring status quo? Is it possible that it should be somewhere between this ratio and the rarity ratio of the 2 metals which actually around 16 or 17:1 ? That is Tip #1. happy to share more if desired.
Tip #2: Ag was money (the legal tender kind) until the mid-60's. Why did that change?
Tip #3: Ag is both an industrial metal AND money.
Tip #4: currency is NOT money.
Tip #5: should I continue?.....
LOL.... No you can't!
Silver is actually far more volatile than gold.... and since you are asking me that question, I wouldn't suggest trying to convince the wife anytime soon!
Just like property investing, buying into commodities or in this case more specifically, precious metals, is multi-faceted and rather complex. So, I ask you, why gold and why now?
Why not silver, corn, rice, oil, pig bellies...... why not yesterday or tomorrow????
I know why Ag, why yesterday, today & tomorrow..... its rather complicated, yet simple at the same time (if that makes any sense)
Edit: OK, I feel a little bad for not giving one big reason. So here goes. Silver is currently running at a ratio greater than 50:1 with Gold. Is this normal? Is this likely to be the enduring status quo? Is it possible that it should be somewhere between this ratio and the rarity ratio of the 2 metals which actually around 16 or 17:1 ? That is Tip #1. happy to share more if desired.
Tip #2: Ag was money (the legal tender kind) until the mid-60's. Why did that change?
Tip #3: Ag is both an industrial metal AND money.
Tip #4: currency is NOT money.
Tip #5: should I continue?.....
Nope, you had me at , you understand Ag. All good.
And thank you for a rational and real reply. A few posters of late are full on bear/bull property, shares is bad/good etc.. but when you ask why, they melt away or quote some Buffetonian logic with any personal opinion.
Will the missus agree to Gold? If she had the new PPOR built she would say "I don't care, buy Mars Bars" but I am on an investment ban until that is delivered. FWIIW we do have small amount of gold in nuggets and fines from an inheritance. Go Gold!
Thanks Peter 14.7
