QE and the Government Debt Bubble

The Fedspeak term is “quantitative easing” or “QE”, but it is simply printing more money than necessary and using it to buy Treasury debt. This has kept interest rates artificially low – for the present.

Wall Street likes QE because stock prices rise with more dollars chasing the same number of stocks. Even though no value has been added, the “sheeple” think that stocks must have more value since the prices have gone up. Sheep are not very intelligent. Sheeple are people who believe the brokers who mislead them. Wall Street makes money by charging fees and by stock manipulation. When the stock price has risen substantially, they sell short.

Realizing that the currency is being devalued, financial experts are buying assets. Gold and silver are favorites. Silver has gone up about 23% in the last 2 months. This should not be annualized since the rate will rise exponentially instead of linearly once sheeple lose faith in the currency. Until then, the ads for buying gold or silver will increase in number. The experts have already bought theirs. They will sell to the sheeple now that the price has gone up.

During the inflation of the housing bubble – helped by artificially low interest rates from the Fed, sheeple went deeply in debt to buy the biggest house possible since “housing prices never decrease, so houses are the best investment.” When they needed money for stuff, they got a line of credit on the home's equity. When the bubble burst, they could not afford the mortgage payments and taxes. Consumer spending decreased because the lines of credit – a personal ATM machine – disappeared. Since 2/3s of GDP is consumer spending, businesses cut back purchases and jobs. Those now unemployed could not afford their debt. A vicious cycle became more vicious.

The Fed's QEs continue to inflate the government debt bubble. Experts have downgraded United States debt and included a negative warning. The longer that the bubble inflates, the bigger will be the “pop” when it bursts. Since the government borrows 40% of what it spends, it will have 2 main options: cut spending by 40% or continue to devalue the currency. In the early 1990s Mexico made the “old peso” invalid and exchanged 1 “new peso” for 1,000 old pesos. What will happen to elderly Americans who saved a lifetime to have $1,000,000 for retirement when it becomes only $1,000 for retirement in an economy with substantially higher prices?