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Reply #29


Response to DemReadingDU (Reply #16)

Sat Dec 14, 2013, 10:16 AM

29. End of US quantitative easing at the beginning of 2014 at the latest (LEAP/E2020 May 2013)

(Excerpt GEAB 75 (May 2013) - BoJ, Fed, ECB : with different methods, contrasting futures):



Actually, the US economy only holds together thanks to the Fed. That’s why it can’t withdraw its support. Because without it there would no longer be enough US Treasury Bond buyers at current interest rates, which would climb to unsustainable levels as a result. Without the Fed, real estate would resume its downward spiral. Without the Fed, the stock exchange would plunge.

Therefore, only external events would cause the Fed to bring this policy to an end. A relapse into recession in the United States will weaken the dollar just like in 2007- 2008 (see chart below) and, if the fall is too hard, will require a halt in the accommodative policies to fix the currency: in fact, the United States’ biggest fear is that the dollar loses its reserve currency status and has to submit to the same rules as other currencies (40), which was about to happen in 2008 when the whole world started to doubt the dollar’s solidity.


Dollar exchange rate in Euros (USD/EUR), October 2005 – August 2008. Source : La Tribune.


It could also be domestic policy, with strong scepticism over the Fed’s policy, which could call the printing press into question. Or Ben Bernanke’s successor (whose term of office comes to an end in January 2014) who may consider that, over time, the risks of continuing this policy are too high.

Finally, there could be pressure from the international community wishing to reform the international monetary system in which a weak currency can’t play an important role: yet in continuing its policy once the dollar became a currency just like any other, the Fed would weaken it excessively so it couldn't claim to retain a major role.

Fed support is thus a drug hiding American problems whilst they are getting bigger and will cause the fall to be even more painful. It can’t continue indefinitely without putting the American economy in danger. It’s only a matter of time before it comes to a painful end. The recession which is about to begin, the end of Bernanke’s term of office and the increasingly lively discussions over international monetary system reform; all these factors are coming together to announce the end of US quantitative easing at the beginning of 2014 at the latest.



... Edit to add (from your source, DemReadingDU):

-Financial editor Jeff Berwick: "If they allow interest rates to rise, it will effectively make the U.S. government bankrupt and insolvent, and it would make the U.S. government collapse. . . . They are preparing for a major societal collapse. It is obvious and it will happen, and it will be very scary and very dangerous."



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