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Shocker: QE3 May Do More Harm Than Good!

More stunning (albeit, late in the day) revelations from Reuters:

Analysis: QE3 may do markets more harm than good

By Natsuko Waki | Reuters
July 27, 2011

LONDON (Reuters) – There may be a point at which global investors get indigestion from U.S. money printing.

Whoa. When have you ever heard our media watchdogs call quantitative easing ‘printing money’? That is the kind of crazy talk we get from Tea Party types.

Why are we getting so much honesty from Reuters all of a sudden? Do they think everyone is on vacation and not following the news?

A fresh round of U.S. monetary easing may even do more harm than good for long-term investors as another flood of easy money into fast-growing emerging economies risks refueling oil and commodity price inflation, sapping consumption and growth

Remember that our news media barely even bothered to report QE1. And they thought QE2 was sheer genius. But now they are rightly pointing out that it causes inflation, which causes higher energy and other costs — which cuts into consumer spending and hurts economic growth.

Which of course is true. But it was just as true for QE1 and QE2.

Nearly in one in two fund managers surveyed by Bank of America Merrill Lynch this month said QE3 was likely…

This has given rise to a debate about whether QE3 works. If it doesn’t give a sustained boost to financial markets and is ambiguous for the real economy, is there any point?

"We have a negative opinion of QE2, and believe QE3 could very well turn out to be ineffective at best, and counter-productive at worst," said Stephen Jen, managing partner of London-based hedge fund SLJ Partners.

"If we are right, QE will be self-defeating in that the more the Fed eases, the more commodity prices rise, which erodes the capacity of consumers to spend on non-energy products and services."

Since Bernanke unveiled the Fed’s QE2 bond buying program in a speech in Jackson Hole in August last year, Brent crude oil have risen 58 percent, while the benchmark CRB commodities index has gained nearly 30 percent

We thought we were the only ones who had noticed.

"If QE3 is simply a repeat of QE2, I don’t think it has a positive impact that has sustainability," said Bob Janjuah, head of tactical asset allocation at Nomura.

"(It) will make a commodity problem even worse. It won’t help the economy but create a much bigger inflationary pressure.

QE3 will force one globally positive growth area, emerging markets, to slow down because of inflation … We could end up with a negative effect." …

As benefits wane, many fear the cost of repeated QE operations could be self-defeating in that more money printing fuels inflation, debases the currency and ultimately raises the government’s borrowing costs

And it only took them two years to figure this out?

This article was posted by Steve Gilbert on Wednesday, July 27th, 2011. Comments are currently closed.

3 Responses to “Shocker: QE3 May Do More Harm Than Good!”

  1. The fact that our economy hasn’t already collapsed is a testament to the underlying strength of the capitalist system, NOT the brilliance of our president or any of the idiotic policies he has championed for the entirety of his term thus far.

    To even suggest QE3 proves that Obama won’t be satisfied until the American economy has been completely destroyed and remade into the Eurotrash socialist central planning model he loves so much. Obama wants us to be Greece! Yeah… things are WONDERFUL in Greece!

    How long until someone calls Obama out as the domestic enemy of America that he is, and charges him with treason. The evidence is already overwhelming. Everything he has done for 2+ years proves he is an enemy of our Nation and our way of life. Hurry up 2012…

  2. proreason

    Printing money is only bad for the people who will have to pay the largesse back at a later date.

    For ancient aristocrats like Dirty Harry and Stretch, it isn’t a problem at all. They will both be dead in 10 years, so lol at the national debt, inflation and other concerns of the little people.

    And for the crime bosses who have insured their own futures, like the boy king and prince Bernacke, it isn’t a problem either. They have bought and paid for their own future with our money.

    But for those of us who have descendents, or who plan to live for more than a few more years, it does appear to be a smidgen of a problem. “Smidgen” – as in “catastrophic”

  3. BigOil

    But…but…Bernyankme is from academia – and he looks thoughtful – and he talks like an intellectual. This economics stuff is complicated and confusing. We should all just calm down and trust the smart-looking guy.


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