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Financial Media Starting to Agree with Peter Schiff: QE4 Is Coming

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In an attempt to stem stock market losses and stimulate a sagging economy, the Chinese central bank slashed its interest rate on Tuesday.

As Bloomberg reported, it was the fifth Chinese interest rate cut since last November.

The one-year lending rate will drop by 25 basis points to 4.6 percent effective Wednesday, the Beijing-based People’s Bank of China said on its website Tuesday, while the one-year deposit rate will fall a quarter of a percentage point to 1.75 percent. The required reserve ratio will be lowered by 50 basis points for all banks to cover funding gaps, it said.”

printing press

Of course, the United States stock market also plummeted Monday, shedding more than 1,000 points in early trading. With signs the American economic recovery might not be as robust as the government wants you to believe, what steps might the Federal Reserve take to shore things up in the near future?

Well, with the Fed’s interest rate already hovering near zero, it can’t follow China’s lead. A rate cut isn’t a viable option. That leads to the specter of another round of stimulus.

Peter Schiff has been saying the Federal Reserve will initiate round four of quantitative easing (QE4) for months. On Monday, his prediction went mainstream, featured prominently on CNBC.

Market chatter about what the Federal Reserve’s next steps will be suddenly has shifted from when it will raise rates to when it will offer more stimulus.

Mind you, no one believes the U.S. central bank is about to start printing money again anytime soon. However, there is talk that faced with a slowing global economy and a domestic market dependent on cheap debt, it’s only a matter of time before the spigots get turned on once more.”

The Federal Reserve has added $3.7 trillion to its balance sheet through quantitative easing since 2008. Three rounds of QE fed a robust stock market bubble. According to CNBC, the S&P 500 has risen 190% since its low point in March 2009. But the recent stock market selloff seems to indicate the bubble could be deflating in the absence of quantitative easing. That means the Fed will ultimately have to take some kind of action to reinflate. As Peter told CNBC, the Fed has essentially put itself into a position where it will have to intervene perpetually.

The Fed is not going to raise rates. They are at zero forever. The Fed is not done with QE, they’re just getting started. The Fed is doing QE4, QE5. This is a never-ending process.”

CNBC correctly points out that the Fed is not in a position to follow China’s lead and simply cut the interest rate.

With no room to take rates lower, markets in near-free fall and worries building over a global recession, another round of easing would be the only monetary policy option left.”

Peter has continually predicted it would come to this. Last April, he told CNBC that not only will the Fed not raise the interest rate, but QE4 is on the horizon.

Eventually the market’s going to have to wake up to this reality. All this rate-hike talk is just talk. The reason they’ve been talking about it for years is because they can’t do it. Because we’re so levered up now because of the Fed, the economy is so screwed up that we need zero-percent interest rates. But I don’t think zero-percent is low enough. I think without another dose of QE the bubble is going to pop and we’ll be back in a recession. So to prevent that from happening and to postpone the day of reckoning, we will get QE4.”

Even back in January, Peter was calling QE4 inevitable.

Of course they’re going to. They guaranteed QE4 when they did QE1. These central bankers, they make our weathermen look good when it comes to forecasting. They keep talking about this great US economy… New York didn’t get buried in snow, but Wall Street got buried in bad earnings and weak economic data. We got three feet of it piling up. We’re going to have QE4. The only reason the dollar rallied – I heard you guys talking about the strong dollar – is because currency traders think it’s the European Central Bank and other central banks that are doing stupid things and that the Federal Reserve has finished doing stupid things. But we’re just getting started doing stupid things. We’re going to do QE4. We’re going to print more money than Europe, Japan, than everyone else combined.”

The Chinese central bank’s move may ease Wall Street jitters and stem the bleeding for a time, but it does nothing to address the underlying issues with the US economy. Quantitative easing is the only wrench left in the Federal Reserve’s toolbox. It’s only a matter of time before the Fed pulls it out.

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5 thoughts on “Financial Media Starting to Agree with Peter Schiff: QE4 Is Coming

  1. Tklist says:

    Rate hike in September, QE4 in 2016.

  2. Guy Stevenson says:

    Let us not forget that we (they) have another “Debt Ceiling” crisis to deal with, as well.

  3. Nicklas says:

    In Sweden we now have a -0.35% intrest rate. Minus. Could US possibly go there soon too?

    • Gord says:

      Nicklas, While the commercial and public banks could very well impose negative rates the Federal Reserve can’t. Correct that, it could but that would effectively destroy the last vestige of the World Reserve Currency status. Essentially almost all worldwide trade is now settled in US Dollars aside from the direct currency swaps using the Yuan (Renminbi) which though growing in scale lack the effective Trade Settlement and Reserve status that the US Federal Reserve Debt Note has a stranglehold on. Any threat to that status has been met with direct military intervention, it is why the IMF refused to allow the Yuan into the SDR. If that happened then the US Dollar would almost instantly tank and trillions of offshore debt would suddenly come home to the US (hyperinflation of the monetary base). The USA would be forced to retaliate to restore Reserve Status at the point of a gun.
      Now let us examine what happens if ‘ the Fed ‘ imposes negative rates, the trillions of ‘ dollars ‘ that are held by Foreign governments as trade reserves would immediately be subject to a ‘ tax ‘ at whatever rate is applied thus devaluing the holdings every second of every day they are held. Next every trade settled, every purchase made, every currency in the world held by the other 6.5 billion citizens outside the USA would immediately be subject to that ‘ tax ‘, in effect it would make indentured debt slaves of the entire world and that skim would be directly deposited at the Federal Reserve and then transferred directly to the US Treasury.
      Now ask yourself, would any country on earth sit back and allow this to happen. They would not and would immediately dump treasuries and currency reserves, convert them to local currency and start trading among themselves. The US dollar would instantly become worthless, hyperinflation comes to the USA.
      So as Peter Schiff has been arguing and Ludwig von Mises has already confirmed, all debt based currencies end in a hyper-inflationary Crack Up Boom whether by choice or forced by the market.

      So the Fed raises rates and trillions in derivatives implodes and the Federal Reserves capital holdings evaporate leading to bankruptcy and the US defaulting on its external debt (32 trillion ?), dollar becomes worthless or hyper-inflates almost immediately.
      So the Fed stays at zero and QE4 or QE Infinity is launched to support an escalating run on countries dumping treasuries and US dollar currency reserves, dollar becomes worthless and hyper-inflates but takes just a bit longer.
      So the Fed rate goes negative and instantly becomes worthless and hyper-inflates.

      This is the end game and lets hope the psychos who are in power don’t launch a nuclear world war to defend the status quo, doubtful but who knows what will happen when a rat gets cornered with no way out.

      Sorry for being so wordy. Have a great day.

  4. Miguel says:

    Brilliant, Gord. Thanks a lot for your comment. You have got a magnificent first hand view of what is actually happening and what is on its way to come. Regrettably, is very far away of what academy view is. And certainly, is just a matter of understanding the difference between a debt-based currency (the natural consequence of unlimited credit expansion via artificially lowered interest rates) and a savings-based currency (the natural consequence of being respectful with savings via a market interest rate) and the effect that both produce in the real economy: While the first only produce bubbles -an increase in price and a decrease in wealth- the second produces just the opposite. If your house increases its price and your income stays flat, then you are impoverished because will never ever be able to move to a better one and ownership will be heavier. I have always been amazed by the fact that such an easy to understand situation is well out of reach for the common citizen…..and even of well respected experts. Obviously none has ever heard of Mises, let alone read or understand him.

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