Genomgången avslutas med följande kommentar. Nicholas spår QE-åtgärder på 3-6 tn USD, men först efter en rejäl marknadskrasch.
Five years into the recent recession, and not only do we lack a clear-cut solution for our growth, but every week it seems there is a new international headwind. Europe may be on the brink of a full continental collapse sparked by their highly integrated failure of a banking system; China’s manufacturing is slowing and it seems that their property bubble is reaching a peak; if/when China falls, then we will see Australia and the rest of Asia fall.
These are not predictions, they are contingent facts, and central bankers know this, so we can expect more of the same in terms of accommodative monetary policy in the near future. The next round of internationally coordinated monetary accommodation in the form bond or direct asset purchases will be the largest number that most international citizens have ever heard in their lives.
We are talking about a number close to 10% of the world GDP (world GDP=$59trillion). Due to the aforementioned diminishing returns to scale of monetary policy, I project the next round of liquidity to be at least $3trillion , and I would not be surprised if we reached $6trillion by the end of it.
The next round will come after international equity markets fall further, there are more bankruptcies, and leading economic indicators deteriorate even more. This is not because the Fed is behind the ball (although it usually is); it is because the costs of further easing currently outweigh the benefits. Remember, the quantitative easing programs are meant to prevent economic ruin, not to inflate asset prices and achieve new highs in asset markets.
Until we reach the brink of disaster, Bernanke will keep his hands in his pockets. Once we do, though, we can be sure that Dr. Ben himself will be greasing up the printing presses.
Nicholas Bucheleres www.NJBDeflator.blogspot.com