Monday, January 27, 2014

QE's End- How It Will Play Out

As most Austrians and others not falling into the Keynesian madness, the end of QE will lead to systematic dislocation of capital in the markets. Jim Rogers, the very vocal and well know Austrian, tells it as it is.

via Birch Gold Group

I wish I was that smart or it was that easy. Back in the late 1970s, Mr. Volcker was told and he came in and said: “I am going to kill inflation because Mr. Carter has told me to.” And Mr. Carter was very clear that he had to stop inflation. I doubt if we’ll have that kind of scenario again but we would think, we would hope, that the Federal Reserve will announce, you know, that they publish their numbers so we can all see what’s happening. At the moment they are buying a trillion dollars a year – that’s a trillion with a “T” – of assets. Eventually we will see that they stop that if they do or slow it down. 

What will probably happen is that they will slow it down at first to see what happens, and if things aren’t too bad at first – and they probably won’t be too bad at first – well what is likely to happen is they will slow it down, things will drop, and then they will rally and the Federal Reserve will say “Hey, this is not so bad, we can do it.” And they’ll cut some more. Things will drop again and then rally, because it will take a while for people to really believe how bad it can get, or will get. And so eventually they will try to cut [QE], it will finally cause the collapse, at that point we will have a big change, because they will throw them out, whether it’s the politicians or the central bankers or whoever … will continue because they like it, they got the job because of the collapse and then we’ll finally start over. But it may be really painful in the meantime.

And via ET Now

The Federal Reserve will announce more tapering as the year goes ahead. I do not know the exact timing when they will start tapering again. The Federal Reserve thinks that the economy is doing better, and they can build some tapering. Eventually, the US markets and the world markets will go down a lot when the Federal Reserve gears up for tapering.

Remember the people in Fed are just bureaucrats and academicians, they do not know much about the real financial world. When markets start falling on tapering, the Fed will get scared and start printing more money. All this is bad for the global economy, as printing of money has never worked in the long term.

As I have shown, a reduction in the money supply will lead to disruptions in equity prices and dis-allocations across asset prices. I have shown this via the $40 billion float and pull back that Greenspan executed back before and after Y2K. What do you think a $500+ billion disruption will look like?

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