Quantitative Easing Explained in English

I don't usually post on economic issues, instead leaving it to people with more knowledge of the economy and how it works such as Karl Denninger and Pete at the Western Rifle Shooters Association. But I found this piece at the American Thinker that is written in...you know...actual English. Monty Pelerin writes Quantitative Easing: Our Tiger by the Tail. As I noted, it is not that most economic concepts are that hard to understand, but rather that the explanations are so obscured by jargon and deliberate obfuscation that I get a headache contemplating it.  But Pelerin explains "quantitative easing" and the consequences of it in simple terms that everyone can understand.

Pelerin's consequences look bleak, no matter how this ends.  On the one hand, quantitative easing has allowed the markets to remain propped up.  Thus, when the smiling happy face talking head on television reports that the Dow is up by some percentage, you can look at that news and figure that those in the know are getting out and some sucker like you or me is being saddled with a worthless investment.  Market prices should have collapsed long ago.  When I look at companies with P/E ratios of 20, 30, or even 50, there is no way I could recover my investment within a reasonable time.  Traditionally, a ratio of 5-7 seems more reasonable to recoup initial investment and begin earning money. Pelerin explains:

Economic and financial performance has been artificially inflated by QE. A bubble in both areas has developed as a result of QE. Chris Martenson explains:

The Fed has been dumping roughly $4 billion of thin-air money into the US markets each trading day since November 2010. The markets, all of them, are higher than they would be without this money. $4 billion per trading day is an enormous amount of money. As soon as the QE program ends, the markets will have to subsist on a lot less money and liquidity, and the result is almost perfectly predictable.

On the other hand, we have already seen just a little of what will be happening in every State, and at the Federal level when the effects of stopping "quantitative easing" start to affect governments.  The union thugs in Wisconsin howled, screamed, committed vandalism, issued credible death threats to lawmakers and otherwise threw a massive tantrum.  It will only get worse.  A lot worse.  Consider the evidence:  When Rand Paul came up with $500 billion in cuts, that even he says are not enough, and John Boehner and the Repugnican leadership rejected that and instead came up with $34 billion, does that sound serious to you?  As I understand it, we would need to cut $1.2 trillion from this year's budget just to break even, never mind tackling the debt.  According to Mike Vanderboegh, we can look for other betrayals as well.  And Boehner doesn't look all that ready to repeal ObamaCare, which means our deficits, and our debt, will only continue to grow.

Pelerin ends with this:

Their choice seems obvious. QE will continue until total catastrophe occurs in the form of a hyperinflationary depression. Politicians will then point fingers at everyone but the real culprits - themselves. In the enlightened era of alternative news, their strategy probably cannot work.

If I were a politician, I would resign immediately and head for safety before it becomes apparent to the masses what is going to happen.

A parting caution: While I expect QE to run until a hyperinflationary collapse ends it, an announcement that it has been terminated could cause a severe collapse in financial markets. Be aware of the possibility of this "Lucy football strategy" by a desperate and reeling Ben Bernanke. Expect QE to be reinstated quickly once some pain is felt.

It is not that they don't get it, but they fear the consequences, personally, too much.