Feds Plan to Duplicate the "Success" of Quantitative Easing

The time to hesitate is through
No time to wallow in the mire
Try now, we can only lose
And our love become a funeral pyre

– The Doors

The Fed spoke. The markets soared.

The Dow rose 193 points yesterday. Gold shot up $23.

The dollar sank, of course…and is now back down to $1.38 per euro.

What did the Fed say to cause so much agitation?

It said that its first round of “quantitative easing” (AKA money printing) was a great success and that it planned to do more. No sitting on their hands at the Fed. No idling on the sidelines. No waiting to see what develops.

Uh uh… They’re going to take action.

Japan too. They’ve been watching their long, slow, soft depression for the last 20 years. They’ve had it. Enough! Basta! Or whatever you say in Japan.

The Japanese feds and their American colleagues have apparently decided that the time to hesitate is through. They’re going to set the night on fire!

They’ve got the will. They’ve got the way. They’ve got the weapon in their hands. They’re going to use it. Collateral damage? What?

Stand clear, dear reader. Hold onto your gold.

Meanwhile, now that Ken Fisher has spoken on the subject, our fears and doubts are greatly salved. Our anxieties relieved. Our nerves are settled.

Fisher says the whole idea of a “new normal” – with slow growth and high unemployment – is “idiotic.”

Bloomberg has the details:

Sept. 28 (Bloomberg) – The next decade will be as good for investors as the 1990s, said Ken Fisher, the billionaire chief executive officer of Fisher Investments Inc., dismissing notions that developed economies face below-average growth.

Fisher said the concept of a “new normal” is “idiotic,” pitting him against money managers including Mohamed El-Erian, the CEO of Pacific Investment Management Co., which coined the term to describe a world of high unemployment, more regulation, and the shrinking importance of the US in the global economy.

“We are chimpanzees with no memory,” Fisher said at the Forbes Global CEO Conference in Sydney. “The next 10 years are going to be just as good as the 1990s. The problems in this current environment we think are so different, and so new and so unique. It’s the same stupid old normal we’ve always had. We’ve got a great future.”


That puts our mind at ease. But wait. We seem to recall Ken relieved our worries in 2007 too. Yes…we were concerned that the bottom was falling out of the housing market. He came to our office in London. Ken told us not to worry. Here’s what he said in March 2007, just as the subprime market was beginning to crack apart:

For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007’s housing disaster turns out to be. Well, there won’t be any housing disaster. We won’t have a landing at all, soft or hard. Right now the US and global economies are both accelerating.

You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn’t be so strong now.

Did you know that housing sales are up in the last few months, not down, and that inventories are lower than six months ago? We’re accelerating, not landing.

Oh, and here’s Ken, turning his eye to the US debt situation in 2007:

We shouldn’t reduce debt. In fact, we need more debt – even from stupid borrowers. The right level of debt would be when we’ve borrowed enough to drive interest rates up, the return down, or a combination of both. Then, we’ll be optimal. But we’re far from that. The US has $55 trillion in debt of all types – mortgages, car loans, local and federal, according to the Federal Reserve Flow of Funds Accounts. I would argue that tripling all these types of debt would probably get us close to profit maximization and increase wealth for society. Imagine what we could invest in!

Let’s see. Triple debt. Hmmm… That would be $165 trillion worth of debt…or about 13 times GDP. So, let’s say this moved interest rates to a reasonable 5% level. That means that more than half the entire nation’s output would be used just to service the debt.

Well, you gotta hand it to Ken. You gotta love him. Most analysts and economists waffle. Most of them give you “on one hand this…on the other hand that”…most hedge their bets and temper their opinions with doubt and maybes. Not Ken. It’s all out in the open…100% nonsense…pure, undiluted claptrap.

Bill Bonner
for The Daily Reckoning

The Daily Reckoning