November 7, 2010
from DollarCollapse Website
With the election over, there’s no political rationale for the Fed printing another $600 billion.
Which can mean only one thing: What they’re
seeing must be terrifying enough to make another round of quantitative
easing seem like the least dangerous alternative.
The Bernanke Fed is playing with fire here.
QE1 was implemented in an environment of
deleveraging, impaired global financial systems and acute economic
contraction. And, importantly, the dollar was enjoying strong performance in
the marketplace as global risk markets suffered from de-risking and general
outflows. QE1 had a stabilizing influence, as it worked to accommodate
financial sector de-leveraging.
Global markets are these days demonstrating robust inflationary biases. Risk-embracement is back in vogue - speculation is rife. The “emerging economies” and global risk markets have been on the receiving end of massive financial (“hot money”) flows. Meanwhile, the dollar has been under heavy selling pressure with heightened risk of a crisis of confidence.
This week’s market activity supported my view
that the environment would seem to dictate that QE2 will only exacerbate
increasingly unwieldy financial flows and unstable global markets.
It means we’re approaching a point when the future doesn’t emerge logically and consistently from the immediate past. Instead of asset prices and interest rates moving by typical modest increments, they’ll gap one way or the other. Circuit breakers might close the stock market while some commodities open lock limit up without even trading.
Big banks or industrial companies will fail
without warning because their derivatives have blown up, while companies in
hot industries go public and double on their first day of trading. Some
currencies will plunge while others soar, leading disadvantaged countries to
impose capital controls and tariffs. And so on - with the US at the center
of the storm.
And the inflation/deflation debate loses its meaning, says Noland: