I have asked the question several times: “What if the Fed threw a party and no one came?” QE 1 came as a surprise party and the Fed surely got bang for their buck. QE 2 and 3 were highly anticipated (or should I say anxiously anticipated) and each evoked less reaction and enthusiasm. Today we effectively got confirmation of QE 4ever to a packed house of giddy and hopeful investors but quietly they shrugged their shoulders and slipped out the back door.
The next few days and first days of January will be very interesting indeed because the Fed effectively announced a $1+ trillion party over the next year and …nothing? No party, no glee, no one on CNBC had their “giddy pants” on. But… what if, what if reality begins to set in? What if no bogus agreement to fix the “unfixable” fiscal cliff gets done? Or what if the “fix” is so bogus that a 3rd grader could see through it. What if stocks went down? Or forbid my political incorrectness, interest rates just started going up? What’s next?
The budget deficit for October and November blew out to $293 billion ($50 billion higher than last year), so… how is that/will that be funded? Where’s the money coming from? Where does the money come from when markets don’t do what they are supposed to and when the economy sinks even further? Who will be the White Knight for Europe? Japan? And ultimately the Fed and U.S. Treasury? There is no White Knight as he has been sullied, dirtied and bloodied over the last 4 years.
Ben Bernanke had always “wished” that he could inherit a depression and show that he could “fix” it with monetary policy. He has gotten his wish and he now knows that he was wrong. “Unlimited” printing or “dropping money from helicopters” doesn’t work. It never has in the past, will not now nor ever will in the future. The problem is that we have already gone out to sea in the helicopter and the gas tank is less than half full. There is no difference between turning back now or continuing, a crash landing into deep water is inevitable.
I can only imagine what is going through his mind; “We need to print more, we didn’t print enough… or soon enough.” It does not matter, in a fiat system this is exactly where it has to end, whether it be sooner or later. It always has and mathematically always will which is why “money” MUST be real in order to retain confidence. A system which has real money as its base will ALWAYS have guests arrive for the little parties they throw from time to time. But, when you have a fake currency and have thrown a non stop party for going on 40+ years and an open bar for nearly 4, “fatigue” sets in and no one shows up. Watch the exits very closely here, investors have virtually stopped entering for quite some time, a shoeshine boy yelling “fire” might be all it takes to close this party down for years to come.