Every few weeks, a new Quantitative Easing (QE) rumor begins. I have been following this phenomenon quite closely while consuming and digesting virtually everything that I can read on the subject. In a nutshell...
QE is the FED's way of liquefying the bankrupt banking sector by injecting 85 billion a month. In an inflation sense- this is incendiary. With all of this free money, the bankers and the elite have run the markets to astronomical levels in this pretend recovery. Predictably enough, outgoing Chairman Bernanke (the same guy who saw no bubble in housing in 2007) assures us that the FED can instantly withdraw all of those excess reserves (trillions) sitting around on member banks' computers.
I can virtually guarantee there will be no stop to QE prior to the 2014 elections.
Instead, the FED will simply talk about ending QE by supplying various lines of bullshit to a naïve and unwitting populace. In fact, this has been their modus operandi over the last 9 months or so. Every time the FED talks about ending QE the market tanks- this I suppose simulates a normal market that occasionally sells off.
A risk manager once told me that the best predictor of future behavior occurs when we examine historical fact.
I believe that 2014 will be the year that common sense gets thrown out on it's ear.
Politically speaking, there's not one chance in 100 that the FED will taper or reduce it's treasury or mortgage purchases unless it runs out of supply. If that occurs, they will simply start buying something else- perhaps state debts or student loan debt.
This is a government that manipulates everything- from propaganda in government statistics to the money supply. That is why there is virtually no chance that QE will end in the next year. To stop QE and drive the market to all time lows- would spell disaster for the ruling democratic party. They would lose an unprecedented amount of seats in the 2014 elections.
I don't see any reason to get nervous about the markets or the ultimate economic collapse until the fall of 2014.
Until then, expect the same old bullshit talk about QE ending when it actually won't. Political expediency, or the willingness to forego doing the right thing for your own selfish interests, is the hallmark feature of Obama and the ruling party. There will no reduction in QE prior to Nov. 2014.
I have read nothing about Janet Yellen (and her very liberal husband) to suggest to me that anything will change anytime soon.
Holding stocks seems fairly risk free- at least over the next 9 months or so. I expect gold and silver prices to languish over this time frame as well. The fun won't start until Oct. 2014- then I think things will get quite interesting.