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QE3 is a given

Notable mainstream economists and influential policy makers are calling for more quantitative easing, so many that QE3 is a given.  Officially, it will be QE3, but in actuality it will be QE4 because “Operation Twist” is quantitative easing with another name.  One important voice now calling for another round of QE is no less than Dennis Lockhart, president of the Federal Reserve Bank of Atlanta and a voting member of the FOMC, which decides such policies for the Fed.

As recently as April 3, Lockhart said that he doesn’t see the need for additional asset purchases [which is how quantitative easing is employed] with the U.S. economy picking up and inflation close to the central bank’s 2% target.   He later added, “I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing.” (

However, two months later, Lockhart cited recent poor jobs reports as justification for more quantitative easing.  Lockhart said that “. . . further monetary actions to support the recovery will certainly need to be considered.” (Financial Times, June 7, 2012).  With such a quick reversal, it shows just how bad Lockhart views the recent job reports.

Other prominent mainstream voices are those of professors Niall Ferguson (Harvard) and Nouriel Roubini (New York University).  Although the professors are not calling for quantitative easing by name, they are calling for “recapitalization” of Europe’s troubled banks.  (Financial Times, June 9, 2012).  Of course, such a program would result in further expansion of the world’s money supply.  The money that would be used to recapitalize Europe’s troubled banks would not be already in existence but would be freshly created.

And, last week the UK government and the Bank of England (the UK’s central bank) went beyond talking and announced a £100 billion “support programme” for the British economy as they, according the Financial Times, “battened down the hatches for a worsening ‘eurozone debt crisis.’”  George Osborne, UK chancellor, said that they were working to “deploy new firepower,” while BoE governor said Mervyn King said that “ugly” economic conditions and “today’s exceptional circumstances create a case for a temporary bank funding scheme to bridge to calmer times.”

Princeton professor Paul Krugman, arguably the most influential mainstream economist behind Ben Bernanke, has long been a critic of the Fed’s quantitative easing programs in that they were not large enough.  He has called for $8 to $10 trillion in quantitative easing.  All of this is on top of a Fed policy of near zero interest rates.

Conditions could not be more ripe for the hyperinflation that John Williams of Shadow Government Statistics is predicting for as early as 2014.  Hyperinflation or not, investors need to position themselves for the times, which includes financial and economic problems of magnitudes never before faced.   Gold and silver are proven vehicles for such times.

5 Responses to “QE3 is a given”

  1. stan morgan

    Venerable economists like Paul Krugman advise $8 to $10 trillion quantitative easing, but this adds a tremendous burden on the debt. How does the US payoff this debt? Or is this additional fiat currency that reduces the value of the dollar? Or is Krugman gambling on the crises of the Eurodollar to hedge the dilution of the dollar? Given the zero interest rate the money in our bank accounts already vaporizes before we replenish. Placing limited resources in 6 month higher interest investments ties up the money. Unemployment adds to the reduced capability to purchase goods, and services. The average consumer does not benefit from creating fiat currency, only the banks. What is needed is incentives to hire more people, reduce unemployment, and not be concerned about supposed hyper-inflation!

    • Olaf

      How do you create more incentives in an economy where everyone is in severe debt? The problem is that the old tricks of interest rate cuts and stimulus packages aren’t working anymore because people don’t have money to spend.

      The govt. in my state has already given incentives to hire teens and minorities at min wage jobs, but from having a relative who works one of these, there are no buyers except at discount sales, and those are getting stale and teaching he customer to hold out. The job rolls claim the store might have 50 people working there, but they are mostly part-time and seasonal. Yet, the govt. can point to these “workers” as being employed.

      In short, we all know what needs to be done, but the politics are unpalatable, so extend and pretend will continue. Meanwhile, the govt. is continuing to pass law to constrict dissent and to impede freedom, so that when it does fall apart and we are experiencing a “Grecian” moment, the laws will be in place to legally quell the unrest and to implement the executive orders to restore the country–they hope!

      • stan morgan

        Instead of emphasizing the negative, incentives, would be an alternative such as tax breaks to companies that hire middle class unemployed. Instead of across the board tax breaks to the millionaires as proposed by Republications with Regan’s trickle down method, apply specific tax breaks to small, and medium size companies, rather than bailouts to major corporations to stimulate employment. These tax breaks would be evaluated monthly to track the hiring of new employees above minimum wage standards. This is one incentive, with other incentives possible. These incentives maybe integrated with the IRS tax code!

  2. Olaf

    A blatant announcement of QE3 would leave Obama open to severe criticism by the Republicans in an election yr. Several of the former candidates have called it treason or mismanagement. Also, it would cause oil prices and with them gasoline prices to skyrocket. Not good in an election yr, esp. since Obama has already released the strategic reserve once.

    True, stock mkt prices would rally, but I don’t think the average person cares, as they are not even in the market. I believe there will be stealth, unannounced measures taken in concert with other countries, to manipulate the currency and attempt to boost exports, more plunge protection team intervention in the mkt, more colluding with Wall Street to prop up stock prices, but no overt intervention, UNLESS the admin sees it as a last ditch attempt to win.

    Also, Romney has not really shown a strong chance of winning the next election anyway. Talking heads are spewing QE3 rumors to goose the mkt, nothing more.

  3. Bill Haynes

    Two Fed presidents, Charles Evans (Chicago) and Eric Rosengren (Boston) have called for further quantitative easing, according to an article on

    “Additional monetary accommodation is need (sic) to more quickly boost output to its full potential level,” said Evans. Rosoengren told reporters that it is “appropriate to have more quantitative easing.”

    Neither men are voting members of the FOMC but become voting members in 2013.

    The sentiment is that more spending will cure the economic malaise. Thus is the success of Keynesianism.


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