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Understanding the Implications of QE3

How will the major asset classes react?
Tuesday, September 18, 2012, 7:06 PM
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Executive Summary

  • We've now entered a new era of economic and fiscal descent; expect the next stage to be prolonged and bumpy
  • Why only two possible economic outcomes remain at this point (and one of them has a 90%+ chance of occurring)
  • How the recent liquidity measures announced by the world's largest central banks will impact:
    • stocks
    • bonds
    • gold & silver
    • other commodities
    • real estate
  • Why adopting a wealth preservation strategy is critical right now (and why so many will fail to do so)
  • Why this is not (yet) the moment to go "all in" in exchanging paper assets for hard ones (but do get started if you haven't already!)

If you have not yet read Part I: The Trouble with Printing Money, available free to all readers, please click here to read it first.

A Process, Not an Event

Okay, the ECB and the Fed are now in the game with unlimited, open-ended commitments to print as much money as necessary to get back to the same rates of GDP growth we had in prior decades. I should note that the ECB actions, at least, will be fully sterilized, meaning that they won't boost the money supply – at least that's the plan right now. Soon enough, Japan is going to have to join the fray simply because it cannot afford a stronger yen here; it will have to print because it is first, second, and last an export economy...

After that, it is anybody's guess as to how long China will put up with its massive $3.2 trillion in foreign exchange reserves being debased willy-nilly, but my vote is 'not long.'

These latest rounds of QE are certainly unnerving and may prompt many of you to want to accelerate your own private efforts at financial, emotional, and physical resilience. By all means, use these moments to focus your attention and efforts. But also be aware that we are experiencing what is certain to be a very long process rather than some dramatic event.

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