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Friday, September 14, 2012


Fed to Print $480 BILLION AGAIN!!!
Yesterday, Fed chief Ben Bernanke proved that what many have suspected all along is indeed true: The U.S. Federal Reserve will not patently stop printing money!
Mr. Ben Bernanke announced that the Fed is going to do the same old thing, it’s going to hold interest rates near zero as far as the eye can see... And it’s going to print whopping $40 Billion (Rs.2,21,680 Cr $/Rs.55.42) new dollars per month in an attempt to stimulate the economy — a whopping $480 billion (Rs.26,60,160 Cr $/Rs.55.42) per year! In short, it’s doing the same things it has done since 2008, but expecting better results, In any way you look at this, that’s The Very Definition Of INSANITY!! The Fed has Already held interest rates near zero percent for four long years, now. Plus, it has already created $1.8 trillion out of thin air through QE I and QE II... And it has already bought hundreds of billions of dollars more worth of long-term Treasuries as part of Operation Twist 1 and 2. 

So what’s the result?
Sure — all that free, easy money will temporarily excite the stock markets around the world but despite everything the Fed has done ... the
** Unemployment has stayed over 8 % for 42 straight months ...
** The average family home is Still falling in value ...
** Profits of many major corporations in US are Still sinking ...
** The U.S. economic growth is Still grinding to a near standstill ...
** And now, as America approaches the precipice of its great fiscal cliff, the stock market looks for the entire world as if it’s a massive bubble about to burst!
** Worse is that, the middle class — the very backbone of the U.S. economy — is getting eaten alive:
HOUSEHOLD INCOME IS PLUNGING: The U.S. Census Bureau just reported that real median household income has now fallen for the fourth straight year. Income has fallen so low, in fact, that when you adjust for inflation, the median family has the same income today as it did in 1967 , now that was the 45 long years ago!
THE INCOME GAP IS WIDENING ALARMINGLY: The Census Bureau is also reporting that the movement of income away from the middle class has just hit a record high. That’s terrible as typically this kind of increasing disparity in income occurs just before economic calamities — and today, it’s more extreme even than before the 1929 stock-market crash and the Great Depression!
U.S. POVERTY IS AT ALL-TIME RECORD HIGH LEVELS: Finally, as if to add insult to injury, the Census Bureau also reports that a staggering 46.2 million Americans now live in poverty! And not only isn’t the Fed Helping ... its failed efforts to revive the economy is creating a second crisis: Thanks to the Fed’s past money-printing gambits, the Producer Price Index just jumped 1.7% in August — hands-down the biggest surge in producer price inflation going back to June of 2009!
Make no mistake:
The U.S. economy is broken.
Nothing the Fed can do will fix it.
To the contrary: The Fed’s easy money policies Created this crisis by inflating the housing bubble. Now, they’re only making matters worse — doing absolutely Nothing for the job market, while driving inflation higher! And as America’s great Fiscal Cliff approaches — the catastrophe that JPMorgan says will push America “head-first into the fiscal meat grinder” — the storm clouds are darker than ever.

The Gold has raised 111.58 % from QE1 to QE3 : Gold jumped after this QE3 by FED the third round of monetary stimulus called Quantitative Easing. QE has been a massive boon for gold, when FED flooded markets with nearly Zero money or free money, gold’s allure as a store of wealth & an inflation hedge is burnished. Loose monetary policy weakens the dollar boosting the GOLD. Fed’s nearly ZERO interest rate pilocy and bond purchasing under QE1 kicked off on 16th December 20008 and Gold was $837.50 an ounce, & today Gold is at $1772 an ounce this means Gold raised to 111.58 % on back of QE1 & QE2 which followed in Nov 2010. So QE & Gold has always been supporting each other..SO ALWAYS BUY GOLD

Impact of QE3 on India: As for India, off course in near term the pattern of QE has always been strong for emerging market like India and for their currencies and even stronger for commodities. The QE programme is good for India for a day or two as it will help the rupee a little bit and at a same time QE surges commodity prices, which is bad for India as it imports most of the commodities to meet its growing needs of the economy, Brent crude is at $115 and any raise in its prices will make inflation to climb again making life difficult for RBI, remember QE2 which was announced on Nov 04 2010 in which Indian Market made a high of 6338 on NOV 05 2010 and had a one way decline post that & so QE2 turned out to be disastrous for India as it stoked inflation. India is not a obvious QE play now, as Indian markets has its own set of problems like high inflation, policy paralysis and of course the scams and political unrest. The diesel price hike of Rs.5/liter is the positive step and so the FDI policy in aviation but these have a short term sentiments..

In short, US FED with the announcement of QE3 gives the clear message to the market that rates will remain this low till 2015 with a hope that this low rates will revive economic growth, but on India one should remain cautiously Bullish, one must look at classic defensive's like pharma, consumer stocks with a risk of breakdown between the investment cycle & the consumer cycle weighs heavily on them.  


  1. I sincerely think this is the time to sitback and watch.


    Thanks for visiting and commenting o the post....

    In my view we should be looking at our economy as its time for us to seriously look into it, we should start saving as soon as we can in order to secure our future ...

    Thanks once again,
    Bhavik shah

  3. Thanks for the details...a well analysed blog, Bhawik. Thanks!

  4. Hello Bhavik, very nice post. I had doubted when Bernanke made statement in Jackson Hole that QE will be started if needed. I suspect it was already in the play. Please see this post and let me know what you think.

    Your Friend
    Ethical Trader


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