Wednesday, October 6, 2010

Quantitative Easing: Putting the Shuck in the Rube

Gary North has a very important article explaining what 'quantitative easing' is and the powder keg that a trillion dollars in excess reserves. It is must reading.

Note: I am not sure when North submitted the article for publication to , but he writes:

I think we are going to get quantitative easing, although I do not know when this will begin.

The "when" is now clear. It is right after the mid term elections. In recent days, the Fed chairman Ben Bernanke has told us so. So has NY Fed president William Dudley, Chicago Fed president Charles Evans and the head of trading at the NY Fed Brian Sack. It's coming.

Most remarkable, according to Goldman Sachs, the new round of QE will be in the range of one trillion plus. Got that? North is rightfully concerned about the trillion sitting on the sidelines as excess reserves. The Fed is going to dump on top of this another trillion dollars!

In other words, forget the powder keg, a trillion on top of a trillion means the Fed is about to go nuclear. Inflation here we come.

Here's North's piece.


  1. I'm trying to get the Feds thinking and I'm having trouble.

    I don't understand what the goal is. If they really worried about the trillions in reserves, (the ones they're trying to keep bottled up via their interest payments, which to my mind will end up being nothing but a finger in the dike.) Why are they adding more to the balance? --Especially considering the gigantic deficits being racked up and also coming down the chute in the next few years?

    Their models, although misguided and wrong, can't be that insane, right?

    Japan has been in stagnation since 1990, and the US is headed for the same path, maybe worse. Is this not obvious to these people? I mean, while their theoretical foundations are flawed, they at least maintain some link to reality, right?

  2. The only reasonable answer is that a collapse is the goal.