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.

A Man Who Almost "Gets It"

I found this letter to the editor of the Asbury (New Jersey) Park Press in yesterday's cache of news from Keep and Bear Arms. S. Duane Ruland makes a convincing argument here. I only have a little nit to pick, at this point in the letter:

None of the above is to suggest we engage in armed revolution, or that some reasonable limits on rights are not acceptable. After all, free speech doesn't allow crying "fire" in a crowded public place or libeling someone, nor does the right to assemble permit blocking city streets.

The emphasis is mine.

Actually, it does permit the crying "fire" in a crowded public place.  No permit is required to exercise one's free speech rights.  You do not have to pass a background check, no sanity requirement is imposed.  If you do cry "fire" and there was no fire, you are prosecuted after the fact for the infraction.  If, on the other hand, there was indeed a fire, you will be hailed as a hero.  Now compare that to the Second Amendment, where you must get a permit to exercise your right.  You must pass a background check, and recently "sanity" requirements have been added to existence of a crime in your background.  You must satisfy the Government that you are not a threat before they will "allow" you to own or carry a weapon.  There is no prior restraint on First Amendment rights, but there is a prior restraint on Second Amendment rights.  But the rights are in fact analogous.  If you misuse your Second Amendment rights, you will be prosecuted.  If you use them as intended, you will be hailed as a hero, saving the lives of innocents.

For those not inclined to think this through, I should point out that uttering anything that you know to be false can have dire consequences, up to and including death of innocent others, if people act on what they hear.  Words have consequences as surely as bullets do.  Therefore, the rights should be treated the same.

I applaud Mr. Ruland for taking on yet another ignorant article and correcting the glaring errors of the "journalist."  It is work that needs to be done, but I have long since grown weary of constantly pointing out these errors.  It is easy to print lies, but it takes an enormous amount of time to correct.  Mr. Ruland gets it, almost.  Cheers to the Mr. Rulands of the world.