Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
In the same category

QE Doesn’t Create Jobs… So Why Tie It to Employment?

IMG Auteur
Published : December 21st, 2012
519 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Editorials

 

 

 

 

Last week the US Federal Reserve surprised yet again by announcing QE 4: a program through which it would purchase $45 billion of US Treasuries every month.


Between this program and the Fed’s QE 3 Program announced in September, the Fed will be monetizing $85 billion worth of assets every month ($40 billion worth of Treasuries and $45 billion worth of Mortgage Backed Securities) ad infinitum.


Indeed, the Fed’s new policies are anchored to its goal of getting employment down to 6.5%. This means the Fed will buy these assets non-stop until employment gets down to 6.5%.


First and foremost, QE does not create jobs. The UK has announced QE efforts equal to an amount greater than 20% of its GDP and has not seen any meaningful job growth. Similarly, Japan has announced nine rounds of QE for a combined effort equal to 20% of its GDP over the last 20 years and job growth remains dismal there.


Based on this, the Fed’s decision to anchor its QE efforts to employment is a bit hard to swallow. Instead, it’s much more likely that the Fed sees something “bad” coming down the pike and is moving preemptively to shore up the system again.


Indeed, while most analysts claim the Fed has been printing money day and night, the truth is that the Fed’s balance sheet didn’t budge much at all for most of 2012. Indeed, as late as mid-October the Fed balance sheet was actually $50 billion smaller than it was the year before.


Then QE 3 and QE 4 came along and the Fed balance skyrocketed from $2.8 trillion to over $2.9 trillion in a matter of weeks. And it will be expanding at a pace of $85 billion per month going forward.


Among other things, this is going to result in higher inflation, greater civil unrest worldwide, and a shortage of high-grade collateral in the financial system.


Moreover, the Fed is well past the point of being able to ever exit this situation cleanly. By its own admission, the primary driver of the stock market has been the hope of Fed intervention. If one day the Fed actually tries to pull out its market props, let alone unwind its balance sheet (which will be north of $3 trillion in size in early 2013) the stock market and the system would not be able to withstand it.


This is the game going forward. The Fed is playing an increasingly dangerous game by making up policies as it goes. And there is no real indication that it has any idea how to exit this situation cleanly.


But two things are certain: costs will be going up… and these policies will work… until they don’t… at which point things will be extremely ugly.


On that note, we’ve recently published a Special Report detailing how to prepare for inflation: what investments will profit most from it and why it’s only going to be getting worse going forward.


Graham Summers


For more insights as well as a FREE Special Report outlining how inflation will tear through the financial system... visit us at:

http://gainspainscapital.com/gpc-inflation/


 

 

Data and Statistics for these countries : Japan | All
Gold and Silver Prices for these countries : Japan | All
<< Previous article
Rate : Average :0 (0 vote)
>> Next article
Graham Summers is Chief Market Strategist for Phoenix Capital Investment Research, an independent financial research firm based in Charlottesville VA with clients in 56 countries around the world.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Iran Agreement Boosts Peace, Def...
29 JulArtboard
A US Naval vessel shot down an Iranian Passenger Jet with 300 passengers, over the Persian Gulf on the 3rd July 1988, they mistook it for a Fighter...
Will Uncle Sam Confiscate Gold A...
31 Julovertheedge
"... , generally larger amounts would be safer stored in the safest vaults in the world and in the safest jurisdictions in the world." An...
Gold market liquidity and manipu...
29 JulPD
Bron, I was wondering if the planned Allocated Bullion Exchange (ABX) would have any impact on the liquidity of the Gold market. Would it not at le...
Is the gold price manipulated?
29 Juldanzas123
This article is a joke. Please stop writing baseless garbage. There is enough real evidence of the things you're still calling conspiracy. GATA hav...
Is the gold price manipulated?
28 Julkeith951
... if one takes the dumping of an usually high tonnage of gold at an illiquid time in the gold market aka the Monday one week ago - then such 'b...
Gold Reserves and GDP: China is ...
30 JulWilliam Tan
Shakespeare was right; "The world is a stage." Unfortunately we have all the bad actors acting at once.
Iran Agreement Boosts Peace, Def...
28 Julsonora69
You have a point. The 2003 Iraq invasion is mostly now considered an ill-advised and unjustified destabilization, with regional & political consequ...
Why we should abandon the State
28 Julovertheedge
What a gigantic pile of horse excrement. Cherry pick everything that has gone wrong. Completely discount the hard fact that the author and ...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Vena Res.(Ag-Au-Cu)VEM.TO
Provides Update With Regards to the Arbitration Concerning the Azulcocha West Project and Enf
CA$ 0.04-35.71%Trend Power :
Exploration and drilling
Rockwell(Cu-Gems-Ni)RDI.TO
Announces Delay in Annual Meeting and Meeting Date
CA$ 0.20-2.44%Trend Power :
Corporate news
Eldorado Gold(Au-Fe)ELD.TO
Reports 2015 Second Quarter Financial and Operational Results
CA$ 4.50+11.39%Trend Power :
Financials
Endeavour Financial(Ag-Au-Co)EDV.TO
Mining Q2 2015 AISC/oz of $898, Profit of $33M And $20M Debt Payment in July
CA$ 0.51+8.51%Trend Power :
Corporate news
Mawson Res.(Au-Ur)MAW.TO
Restarts Drilling at the Palokas Gold Prospect in Finland
CA$ 0.17+6.25%Trend Power :
Corporate news
Goldcorp(Cu-Le-Zn)G.TO
Achieves Record Quarterly Gold Production; Updates 2015 Cost Guidance
CA$ 17.45+6.01%Trend Power :
Production
Claude Resources(Au-Cu-Ngas)CRJ.TO
Provides Date for Q2 Results and Conference Call
CA$ 0.65+3.17%Trend Power :
Corporate news
Richmond Min.(Ur-Au-Gems)RMD.V
- Exploration Update
CA$ 0.09+0.00%Trend Power :
Corporate news
Arianne Phosphate(Ur-Mo-Ti)DAN.V
Extends the Term of Warrants
CA$ 0.88+2.33%Trend Power :
Financings
Anaconda Min.(Au)ANX.TO
Reports 12.83 g/t Gold Over 4.38 Metres and 8.55 g/t Gold Over 4.97 Metres from Channel Sampl
CA$ 0.05+25.00%Trend Power :
Corporate news
Comments closed