Crash Alert 2
September 14th, 2012
I wrote on Wednesday “Crash Alert”, I should have titled it “Panic Alert”, which is exactly what the Fed did yesterday. Yesterday they announced “QE 3.5″(Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates) where on top of Operation Twist and after QE1 and 2, they will purchase $40 billion per month of MBS (mortgage backed securities). I do want to mention that this is an outright confession that what they have done so far …has not worked, otherwise there would be no need for “more.” We, us peons, us sheep, were told (spun) all along things like “green shoots, recovery, sustainable recovery” etc., what have not heard because it is neither credible nor believable is the word “expansion” (growth). Yesterday the Fed admitted the failure of previous policy response.
The timing of this latest panicky policy response should tell you more than you need to know. We have an election coming up in less than 60 days, never, NEVER (other than 2008) has the Fed eased policy within 6 months of an election, this should tell you a lot! In fact, because the program is “open ended” (as in infinity as Jim Sinclair has said many times before), the Fed has gone “all in”. The $40 billion per month was not the key, the “open ended” part is because it illustrates that the oh so famous “exit strategy” talked about in 2009 and ’10 will never come. There is no turning back now.
Let me put this new $40 billion per month in perspective. $40 billion per month (which if you know government will only be expanded over time) equates to just under $500 billion annually. $500 billion is equal to 3% of GDP. $500 billion is more than the ALL of the “official” (supposed) Gold held by the U.S.. Do you see the irony here? This QE3.5 is just another plan in a long line of failed plans. It is just another plan, greater in size than our Treasury even claims to have in reserves (created and spent in less than 1 year)!