The Fed must literally be about to pee itself.
The $600 billion in QE 2 bought at best roughly three months’ worth of improved economic data. Granted, it was heavily massaged economic data (US economic data is now largely a work of fiction), but for simplicity’s sake, we’ll say that the Fed got roughly one month’s worth of improved economic data for every $200 billion it spent.
However, QE 2 ALSO blew up food and energy prices up: between 2010 and 2011 gas rose 33% while ground beef, cheese, and vegetables were all up in the double digits as well.
So the Fed needed things to cool down a bit. So they allowed QE 2 to end. Of course, Bernanke juiced the market one final time to the tune of $76 billion, probably hoping that the market would buy his bluff and believe that things might hold up without Fed juice.
But the market didn’t. Instead, the markets have begun to implode proving beyond any doubt that the Fed was the primary support behind the stock market rally.
So here we are today. The US economy has very clearly fallen off a cliff. The Fed already has a $2.8 trillion balance sheet (larger than the GDP of France, the UK or Brazil). Announcing QE 3 would mean creating an inflationary disaster. And NOT announcing QE 3 means a market collapse and very likely another 2008 scenario.
So it’s literally “pick your monetary poison.”
However, in the end, regardless of how we get there, QE 3 will come. The reason for this is that EVERY Fed move since the Financial Crisis began has been aimed at propping up the large Wall Street banks who continue to remain insolvent due to their TRILLIONS in derivative exposure.
When it comes between screwing the taxpayer vs. triggering a systemic implosion that will destroy the banking oligarchs, the Fed has taken option #1 EVERY TIME. They’ve already done it to the tune of $4 trillion (at the bare minimum). They’ll do it again.
Why?
Because letting the banks collapse means hitting “reset” on the entire financial system (at least temporarily). Wall Street as at minimum over $200 TRILLION in derivatives sitting on its balance sheets. And the Fed will do anything it can to try and contain this disaster. That includes kicking the US Dollar off a cliff and screwing US consumers.
Ultimately, all of these efforts will fail (see the Euro situation today). But this will only happen after the Fed has done any and every action it can to prop things up. This will include QE 3 and as many QE’s as the US Dollar will allow.
So, QE 3 is coming. We might even see QE 4 before the system collapses. But the system WILL collapse. And when it does, it will be a 2008 type Crisis on steroids.
The reason for this is that the Financial System is now even more leveraged than it was during the Tech Bubble. When the Crisis hits all the over-leveraged players (read: EVERYONE) will have to sell positions to meet margin/ redemption calls.
This will kick off a death spiral in the markets as every drop results in more and more selling from financial institutions. Add to this the collapse of the Euro, a China hard landing, and US debt default and you’ve got the makings of a global catastrophe: think what’s happening in Greece with now on top of a stock and bond market crash.
What will follow will be the equivalent of 2008 all over again, along with food shortages, civil unrest, outbreaks in crime, bank holidays, and the like. It will, in short, be like what’s going on in the Middle East today (though NATO won’t be bombing us).
Which is why if you haven’t already taken steps to prepare yourself and your portfolio for the coming disaster, you need to do so NOW.
I can show you how…
I’ve recently published three key reports titled Protect Your Family, Protect Your Savings, and Protect Your Portfolio all in all 40+ pages of material devoted to showing individual investors how to prepare these areas of their lives in great detail.
I’m talking about how to prepare for bank holidays, food shortages, stock Crashes, debt defaults, civil unrest and more.
When it comes to profiting from this kind of disaster, few people on the planet have my ability to make Crises pay off.
To whit, my clients actually made money in 2008, having been warned a full three weeks in advance of the Crash to get out the market and go short.
I believe we could see another 2008 situation unfold in the near future, which is why I just unveiled six specific trades to subscribers… all of which will pay off HUGE returns as the current stock market collapse accelerates.
So we’re ready for whatever may come. And the worse things get… the more profitable our strategy will be.
If you’ve yet to take these steps yourself, it’s not too late… in fact, you’ve still got time to get your financial “house” in order to not only survive what’s coming… but potentially even make serious money from it.
All you need to do is take out a “trial” subscription to my Private Wealth Advisory newsletter. You’ll immediately be given access to all of the reports I detail above… and you’ll also be on my private client list to receive my bi-weekly investment reports as well as real-time trade updates on when to buy and sell various investments.
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To get started with you Private Wealth Advisory subscription today, download the Protect Your Family, Protect Your Savings, and Protect Your Portfolio reports and start taking action to prepare for what’s coming…
Good Investing!
Graham Summers
Editor In Chief
Gains Pains & Capital
