Ben Bernanke, Chairman of the Federal Reserve recently launched QE3, the third round of federal stimulus. Many financial advisors are predicting that QE3 may be the straw that breaks the camel’s back.
The first federal stimulus, QE1, was launched November 25, 2008 and lasted 17 months, ending March 31, 2010. They spent $100 billion per month on mortgage backed securities for a grand spending total of $1.7 trillion. QE1 was so successful that gas rose 57% from $1.75/gal. to $2.75gal. and gold rose 55% from $725/oz. to $1,125/oz.
The second federal stimulus, QE2 was launched November 3, 2010 and lasted 7 months, ending June 30, 2011. They spent $85 billion per month buying mostly U.S. treasuries for a total of $600 billion. QE 2 was almost as successful as QE1. This time gas rose 28.5% from $2.80/gal. to $3.60/gal. and gold rose 28% from $1,325/oz. to $1,700/oz.
The first two stimulus plans had time and spending limits. QE3 does not!
Under QE3, the Feds will be spending $85 billion per month. They will be purchasing $40 billion worth of mortgage backed securities and $45 billion worth of U.S. treasuries per month. This will continue until such time that the labor market improves. In other words, there is no time limit or spending limit on QE3.
According to some financial experts, QE3 will cost $1.17 trillion by the end of December 2013 raising the federal balance to a total of $4 trillion. By the end of 2014, it will surpass $5 trillion and by the end of 2018, if the labor market does not improve, the federal balance will top $28 trillion.
Based upon spending $85 billion per month, the same financial experts calculate a 2-3% increase in gas and gold per month for all of 2013, ending the year with over a 24-36% increase. The result would be gas prices increasing to $4.46 to as much as $4.90/gal. by the end of 2013 and up to $5.53 to $6.66/gal. by the end of 2014.
In the three weeks prior to the launching of QE3, gold went up by another 15%. Calculating a 20% increase per year under QE3, gold will reach $3,550 by the end of 2014 and be worth of $4,000/oz. by 2018.
Damon Geller pointed out that:
“Quite notably, your wealth in gold buys exactly the same amount of gas at the end of a QE period as it did at the beginning, but your USDs buy far less each time.”
Geller also pointed out the insanity of what the fed is doing and proposes a better alternative for the money they intend to spend to help improve the labor market:
“This policy is complete insanity. It’s simple math puts gas prices in September, 2014 at 25-40% higher than in September, 2012 and well over $6. It puts gold in the $2350-$2500 range and past $1900 pretty quickly. It debases the US dollar significantly, again, and at a time when we need fiscal responsibility more than ever. But here’s the real insanity behind this kind of move and its perceived intentions: How does spending $40 billion a month buying toxic paper from banks even help the labor market anyway? How can the Fed even get away with another huge lie and distortion like this one?
Not that I think it’s a good idea to print money and replace debt for credit (as credit dies) to try and resuscitate capital markets. But I don’t understand why, if the Fed is going to spend money to try and help labor, they don’t invest $40 billion a month into the Small Business Association? That money is federally guaranteed and would improve the labor market a whole lot faster.”
Basically, the move the fed is taking in QE3 has no redeemable qualities and will lead to certain financial disaster if allowed to continue. It will only make conditions worse which will only hurt the labor market even more which will cause the stimulus to continue on and on until our economy collapses in total ruin.
I’ve said it once and I’ll say it again, this is exactly what the Obama administration wants. They need the economy to fail so they can declare a state of emergency and dispense with all of the normal ways government. This will allow them to seize absolute dictatorial control over America and there won’t be a thing you and I can do to stop it once it happens.
I’m a big baseball fan and in baseball, three strikes and you’re out, three outs and your inning is over. In America, QE3 may well be our third strike and third out, and then life as we knew it will be no more. Game over! Freedom over! America gone!