The Fed will absolutely have to engage in some kind of QE. It might be a toned down version like QE lite (which supposedly doesn’t involve additional money printing). Or the Fed might try to make it a QE that would be more palatable to homeowners (targeting mortgage rates or some such thing).
However, the fact remains that the Fed HAS to continue with QE of some kind. The reasons for this are:
1) The $180+ TRILLION interest rate based derivatives market (90+% all of which are owned by the TBTFs)
2) The debt implosion a spike in interest rates would have
3) Having become the primary buyer of US debt, the Fed must continue to buy or risk a debt collapse in the Treasury market
Whether or not you like QE (yes, there are some insane people who think it’s a good idea… unfortunately they work for the Fed), this is the reality our financial system faces.
Indeed, if the Fed were to quit QE for good the resulting crisis would make 2008 look like a picnic (the 2008 collapse was triggered by the CDS market which was only $50-60 trillion in size, les than one third of the interest rate based derivatives market).
So more QE is on the way. Which ultimately will result in the US Dollar collapsing. In fact, the only reason the Dollar hasn’t collapsed already is because it’s priced against a basket of similarly flawed currencies.
In other words, we’re pricing junk (the Dollar) with other junk.
The whole point of all of this is that inflation is coming in a BIG way. What we’ve seen so far is nothing compared to what’s going to hit once the US Dollar breaks to new all-time lows (at the pace we’re going this will hit within two months).
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