QE3 “Was The Only Iteration Of Fed Stimulus Which Did Not Increase Inflation Expectations”

QE3 Has Failed Miserably

Michael A. Gayed – chief investment strategist and co-portfolio manager at Pension Partners, LLC, and before that portfolio manager for a large international investment group – notes at MarketWatch:

I have said this before, and it bears repeating, something is very wrong with this iteration of quantitative easing. This was the only iteration of Fed stimulus which did not increase inflation expectations, which historically are the conditions under which stocks tend to outperform bonds.

Despite a massive run higher in U.S. stocks last year, there is a huge disconnect which must be resolved. If U.S. stocks are right, inflation expectations must rise and bring with it commodities, see the PowerShares DB Commodity Index Tracking Fund DBC -0.68% l, and emerging-market stocks. If inflation expectations are right, then U.S. stocks have a lot of room to fall.


This isn’t to say that the previous rounds of quantitative easing were helpful. All they did was hurt the American economy and the vast majority of Americans, at the expense of a couple of fatcats. Just ask former high-level Fed officials, the architect of Japan’s quantitative easing or academic economists.

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  • jadan

    Increase whose inflation expectations? This QE “stimulus”, AKA “cash for clunkers” or “cash for trash” has created price inflation and your average consumer has been watching prices rise since the depression began, even though the money supply has been contracting ( insert incomprehensible chart here ) and demand is slack because people have no excess money to spend. Odd how demand falls, yet prices rise. Goes against nature! This is what happens when our economy financializes itself and stops creating real new wealth. Production goes overseas. Instead, it creates paper wealth. Paper wealth tends to devalue the currency. Prices seem to inflate. The currency is actually being devalued creating the illusion of rising prices. This is why financiers are worthless parasites. If they ever were “job creators” assisting in the productive allocation of capital, they are no longer. They send jobs overseas, they speculate and manipulate markets, driving food and fuel prices up. Then they look at each other and say: Gee whiz, we gotta stop this inflation somehow! Raise interest rates, cut wages, slash soc sec and so forth. Michael Gayed is one clueless fella!

    • KFriendly11

      Jadan,
      You’re the first person who sees what is happening the way I see it. Thank you for exposing QE for what it truly is and hopefully opening the eyes of those who don’t understand what will inevitably happen to our economy. i.e. Ticking time bomb.