QE3 Is a Given

BY BILL HAYNES via Resource Investor
June 18, 2012

Notable mainstream economists and influential policy makers are calling for more quantitative easing – so many that QE3 is a given. Officially, it will be QE3, but in actuality it will be QE4 because “Operation Twist” is quantitative easing with another name. One important voice now calling for another round of QE is no less than Dennis Lockhart, president of the Federal Reserve Bank of Atlanta and a voting member of the FOMC, which decides such policies for the Fed.

As recently as April 3, Lockhart said that he doesn’t see the need for additional asset purchases [which is how quantitative easing is employed] with the US economy picking up and inflation close to the central bank’s 2% target. He later added, “I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing.” (Futuresmag.com).

However, two months later, Lockhart cited recent poor jobs reports as justification for more quantitative easing. Lockhart said that “. . . further monetary actions to support the recovery will certainly need to be considered.” (Financial Times, June 7, 2012). With such a quick reversal, it shows just how bad Lockhart views the recent job reports.

Other prominent mainstream voices are those of professors Niall Ferguson (Harvard) and Nouriel Roubini (New York University). Although the professors are not calling for quantitative easing by name, they are calling for “recapitalization” of Europe’s troubled banks. (Financial Times, June 9, 2012). Of course, such a program would result in further expansion of the world’s money supply. The money that would be used to recapitalize Europe’s troubled banks would not be already in existence but would be freshly created.

And, last week the UK government and the Bank of England (the UK’s central bank) went beyond talking and announced a £100 billion “support programme” for the British economy as they, according the Financial Times, “battened down the hatches for a worsening ‘eurozone debt crisis.’” George Osborne, UK chancellor, said that they were working to “deploy new firepower,” while BoE governor said Mervyn King said that “ugly” economic conditions and “today’s exceptional circumstances create a case for a temporary bank funding scheme to bridge to calmer times.”

Princeton professor Paul Krugman, arguably the most influential mainstream economist behind Ben Bernanke, has long been a critic of the Fed’s quantitative easing programs in that they were not large enough. He has called for $8 to $10 trillion in quantitative easing. All of this is on top of a Fed policy of near zero interest rates.

Conditions could not be more ripe for the hyperinflation that John Williams of Shadow Government Statistics is predicting for as early as 2014. Hyperinflation or not, investors need to position themselves for the times, which includes financial and economic problems of magnitudes never before faced. Gold and silver are proven vehicles for such times.

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