Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
UK Local Election Results Forecast for General Election 2017 - 26th May 17
Stock Market & Crude Oil Forecast! - 26th May 17
Opinion Pollsters UK General Election Seats Forecasts 2017 - 26th May 17
Bitcoin and AltCoins Crypto Price Correction - 26th May 17
Bearish Head and Shoulders in EURUSD? - 26th May 17
SELL US Stocks - Massive Market CRASH WARNING! - 26th May 17
EURGBP: A Picture of Elliott Wave Precision - 26th May 17
Credit Downgrades May Prompt Stock Market Capital Shift - 26th May 17
Rosenstein and Mueller: the Regime Change Tag-Team - 25th May 17
Stock Market Top - Are We There Yet? - 25th May 17
Should I Invest My Fortune in Gold? Inaugural Lecture by Dr Brian Lucey - 25th May 17
USD/CAD Continues Decline - 25th May 17
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

QE3 and Coming Economic Crash

Economics / Financial Crash Oct 20, 2012 - 02:51 PM GMT

By: EWI

Economics

Best Financial Markets Analysis ArticleWhy monetarist theory is flawed

Federal Reserve Chairman Ben Bernanke really means it this time.

He will rescue the economy.


Ben S. Bernanke for the first time pledged that the Federal Reserve will buy bonds until the economy gets closer to his goals ... . The central bank yesterday announced its third round of large-scale asset purchases since 2008, with the difference that it didn't set any limit on the ultimate amount it would buy or the duration of the program. ... Bernanke is "going to fight and fight until he sees a real improvement in the economy," said a co-head of global economics research at [a major bank]." He believes quantitative easing can help the economy, so he'll just keep at it until there's a real turn in the economy."

Bloomberg, Sept. 14

But we've all heard the definition of insanity: doing the same thing over and over and expecting a different result.

Why should we think QE-3 will work when the previous two failed? (Don't think they failed? Then ask yourself why we need a third one.)

Granted, this round of quantitative easing appears open-ended. And it includes a pledge to purchase $40 billion a month in mortgage-backed securities. But high interest rates don't explain the sluggish residential real estate market. Home purchases are slow for the same reason that many business owners haven't expanded. A Sept. 12 CNNMoney article quotes a former Fed economist:

"Businesses are not hesitant to invest and hire because interest rates are too high - they're hesitant because of the uncertainty surrounding their future prospects."

When the August jobless rate fell to 8.1%, the widely reported reason was because so many people gave up looking for work. U.S. business startups are at record lows. Food stamp rolls recently skyrocketed. Several U.S. municipalities are declaring bankruptcy. Ratings service Moody's just warned of a possible U.S. downgrade. And the national debt just surpassed $16 trillion.

Monetary policy will not fix what ails the economy. Robert Prechter explains:

Monetarist theory holds that each new dollar created can support many new dollars' worth of IOUs throughout the banking system through re-depositing and re-lending, a process known as the "multiplier effect".... Every aspect of this theory is flawed, from the assumption that credit is fundamentally good for the economy and should always expand to the bedrock theoretical assumption that human society is a machine where physics equations apply. Waves of social mood have no place in monetarist theory, but they can play havoc with the monetarists' supposed machine when they reach extremes or undergo unforeseen (what other kind is there?) reversals.

The Elliott Wave Theorist, September 2011

Few people foresee a major economic reversal just ahead. The fact that Fed policy has become "QE Infinity" (it already has a nickname) tells us that something is badly wrong with the economy. And that something is a massive credit bubble

Monetary policy cannot make the global credit bubble simply vanish. Only a deflationary crash can do that. The chart below reveals why.

Look how fast the debt deflation unfolded in 1929-1932.

Learn what EWI expects regarding today's much bigger credit bubble.

See more charts and read insightful commentary that will help you position yourself now for what's to come next.

The herd keeps looking for intervention by government entities to aid their investing decisions. It's time to break away from the herd and start investing independently. EWI is here to help ...


Learn to Think Independently

You'll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International's 30-year history; you'll also get new analysis, forecasts and commentary to help you think independently in today's tumultuous market.

Download Your Free 50-Page Independent Investor eBook Now

This article was syndicated by Elliott Wave International and was originally published under the headline Bernanke's Bigger Bubble: QE-3 and the Coming Economic Crash. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife