Pinnacle Activity Ticker
QE3 Is Nothing New and It's Not That Big
Pinnacle Digest writes: In Guy Lerner’s latest article he reviews the amount of hype around QE3 given the fact that it is open ended. But is the hype warranted? Consider that Japan is now on QE 8, yet the country has been in a deflationary spiral for years. Also consider that in the US, money supply increases close to 7% annually as it is.
In our interview this past weekend with Adam Hamilton we asked him about QE3 and the fundamentals behind it. He stated “The Fed and other major central banks are constantly printing money, perpetually expanding their fiat currencies by long-term averages of 7% to 8% annually. QE3 is really small compared to the normal money-supply growth, so fundamentally it isn't that big of deal.”
Guy Lerner, like many playing the markets, believes QE3 is more like QE infinity. As dramatic as an ongoing QE program is, and how pro-inflation it may be, is it really news to the market? Lerner states “Ever since QE2 came on the radar screen back at Jackson Hole 2010, the Fed has been implementing some sort of liquidity operation nearly 90% of the time. Starting with the expectation of QE2 back in August, 2010, the markets have been focusing on and influenced by QE in some form or another. QE – infinity didn’t start last week. It started in August, 2010, and it has been with us for 97 out of the last 108 weeks.”
Lerner explains that the only change in the QE3 announcement (from past QE programs) was that Bernanke communicated its open-ended factor. Remember that for the last two years, 90% of the time, the market has been under the influence of an active QE program. Without loose monetary policy this market, and the economy, will collapse. The Fed understands this and is merely continuing its same strategy used since this crisis started.
Click here to read Guy Lerner’s full article.