I was wrong. OK, I said it. I thought for sure Ben Bernanke wouldn’t do it. That is Quantitative Easing 3, commonly called QE3. But he did and I’m appalled. When will the madness stop?
Perhaps only when the Fed Chairman is driving the economy off the cliff. We were driving toward it already. Now it’s “pedal to the metal.”
No Central Bank has ever done anything like this in modern times and we are clearly in uncharted territory with this giant experiment. I hope he’s right because he and European Central Bank Chairman Mario Draghi just bet the ranch on it.
You might recall that in mid-summer 2007, then Treasury Secretary Hank Paulson asked Congress for the authority to buy up some troubled sub-prime assets if necessary. He said he didn’t think he would need it but “if everyone knows you have a bazooka in your pocket, you won’t have to use it.” Of course, it wasn’t but a month or so later he fired the bazooka.
This time it’s Bernanke firing the bazooka. Actually it looks more like a cannon and it’s starting to look like the shoot-out at the OK Corral.
What the Fed did was actually more than QE3. Call it QE3 plus — a gift that will now keep on giving. No maximum. No time limit. I think Bernanke just cleaned out his ammunition shed.
Instead of doing a certain amount of QE, or for a certain time period, this time it is open-ended. They will keep doing it until things get better.
What does that mean? More importantly, what if it doesn’t? Do we keep going until the “mother of all bubbles” finally explodes? This is pretty scary stuff. It seems that all major central banks of the world have basically said they will never face the music and allow economies to seek their natural levels.