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Posted in 1 - Liquidity Trader, Fed, Central Bank and Banking Macro Liquidity

Is QE Infinity Enough?

The Fed has now promised QE infinity. But will it be enough, in the face of Federal deficit financing to infinity and beyond? Because for every dollar the Fed has promised to print and pump through Primary Dealer accounts into the financial markets, the US government has promised to issue about $3 in new debt.

$1 of financing for every $3 of new Federal debt is a whole new game of QE Lite that is unproven. Under earlier versions of QE, the Fed always printed QE dollar for dollar of Federal debt. The Fed monetized everything through its middlemen the Primary Dealers.

Under Pandemonium Panic QE, back in March and April, the Fed actually pumped in $2 for every dollar of new Federal debt issuance. That drove a meltup in stock prices. Which in turn triggered a rebirth of animal spirits and wild speculation in a bubble within a depression, the likes of which we’ve never seen.

So is this bubble sustainable when the Fed will only buy a third of the Mount Gargantua of new Federal debt issuance each month?

I’ll just say, Harrumph! I highly doubt it. I explain why, herein.

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