It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. Henry Ford

Those who surrender freedom for security will not have, nor do they deserve, either one. Benjamin Franklin

The idea that you know what is true is dangerous, for it keeps you imprisoned in the mind. It is when you do not know, that you are free to investigate. ~ Nisargadatta Maharaj

Tuesday, 27 December 2011

Tim Price  :

QE is a Ponzi scheme designed to please one powerful constituency – the City of London. David Stockman was director of the Office of Management and Budget in the Reagan administration. He was a key member of Ronald Reagan’s financial team. Here is what he said recently about quantitative easing, as practised in the US and the UK:

These [QE] programmes… are simply designed to… keep the stock indexes going up, [in the hope that] somehow that will fool the people into thinking they are wealthier and they will spend money. The people aren’t buying that. Main Street is not stupid enough to believe that engineered rallies as a result of QE stimulus are making them wealthier and so they should go out and buy another Coach bag. This is really crazy stuff... I think the Fed is injecting high grade monetary heroin into the financial system of the world, and one of these days it is going to kill the patient.”

I agree with him. And I believe that QE is dangerous for a number of other reasons:

  • QE badly distorts capital markets, particularly those for government bonds, giving a false sense of market strength.

  • It is inflating yet another asset bubble – what would be the third in just over a decade.
  • It insidiously devalues the pound. So it destroys – not creates – wealth.

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