QE 3 Will Only Come With Catastrophe
by Phoenix Capital Research
The financial world is buzzing with the news that Bernanke telegraphed QE 3 this Friday. I donâ€™t see it. The political landscape in the US is changing fast and the Fed is going to be coming under increased scrutiny going forward.
Look at the recent article from Bloomberg revealing the Fedâ€™s issuing $1.2 trillion in secret bailouts to Wall Street. Look at the comments from Paul, Perry, and Bachmann about the Fed.
This isnâ€™t 2010 when the Fed could launch a new QE program without any real political consequence. Bernanke is going to be lumped in with Obama and used as a political tool for the 2012 Presidential election. Weâ€™re already seeing signs of this now and the election is still a year away.
Remember, Obama was the one who re-instated Bernanke. This fact will be used in the debates and during the political process in general. Not many commentators noted it, but the political tide turned with QE 2 when public consensus went from â€śthe Fed is saving the world,â€ť to â€śthe Fed has blown up the cost of groceries and energy.â€ť
Going forward, no one will buy the idea that QE is going to help the economy any more. That kind of argument works in an environment without any approaching elections, but weâ€™re no longer in such an environment: within 14 months people will be voting.
If you need an example of what I mean, take a look at Angela Merkel in the German elections. Her party has been getting absolutely destroyed. And the primary reason is her backing of the Greek bailouts (56% of Germans say the Euro has brought them disadvantages).
Bernanke cannot simply launch QE 3 as he pleases anymore. In order for QE 3 or something like it to be unveiled, weâ€™re going to need to see either:
1) A MAJOR bank fail
2) A full-scale Crash with the S&P 500 sub-1000