Ben Bernanke has announced some pretty drastic measures recently with QE3 ($85 billion per month) in September and just last week QE4 ($45 billion per month). The Fed will buy a total of $130 billion per month in treasury bonds and mortgage backed securities under these programs which will now run indefinitely until unemployment goes below 6.5%, which begs the question what if unemployment doesn't reach that level for many years. This is very possible under current market conditions. The economy is weakening again, only this time we've thrown everything at the problem only to admit these programs aren't working. So instead of doing something different, we continue to implement the same programs repeatedly. The ECRI has already stated that the US economy entered a recession again in September.
The problem with quantative easing is that to artificially keep rates low, we must create inflation. This is because we're artificially buying the bonds and mortgage backed securities. The real worrisome part of this is we have to do this because there are not enough private buyers. This is because private buyers are worried about getting repaid on their investment. Yes, private buyers are starting to get worried about the US being able to pay them back! Not to mention our bond rating was recently cut and is likely to be downgraded again by the major ratings agencies. We've already seen the effects of QE1 and QE2 with rising food and gas prices. Other assets that have increased are oil, gold, silver and many other commodities and natural resources. This is driving the price of everything up. The recently announced QE3 and QE4 programs will eventually produce the same results. Expect more inflation in the next year. In fact, eventually we could see hyperinflation take hold.
I really believe that 2013 will be another year that proves to be more financially difficult than the last. This has been the case since the start of the crisis in 2008. I personally don't think the US economy will recover until 2022. There are just too many problems to overcome. The government is broke at a time when more and more people are requiring government assistance. Food stamps are at an all time high, unemployment benefits have expired for many and now they're running out of money. The problem is that the Fed who runs our monetary policy is insane. They keep doing the same thing and expecting a different outcome. They have already thrown everything and the kitchen sink at the problem with no major improvement. Yes, they keep things moving but at what cost. Someone is footing the bill and it's not the Fed, it's us. Eventually taxes will have to increase to pay for all of this spending. More taxing at a time when we're seeing major inflation in everyday items (food, gas, and energy) will be devastating for many. We're on the brink of the greatest wealth transfer in history. For those that are prepared, lives will be transformed. I'm preparing my subscribers for this environment and teaching them how to profit from it. Sign up now so you don't have to rely on the government to feed and house you.
Jamie has an MBA from Rutgers University and a Professional Certificate in Real Estate Finance, Investment and Development from NYU. He's traded stocks since he was 13 and bought his first property within a year of graduating college. He also flipped properties and got out before the 2008 mortgage meltdown because he was able to see the market turning before it happened. He's started two companies and also has experience in investing in antiques, collectibles, gold, silver and trading futures.
He currently operates a website dedicated to helping people achieve financial freedom. For help with money visit http://www.jamiesmoneyadvice.com/
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