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I tried to get a fatwa levelled against ADVFN CEO Clem Chambers with an early post on my ADVFN blog. That failed. And so I must try to take him to task for his assertion that Ben Bernanke of the Federal Reserve has done us a favour by signing up for QE3, QE4 and QE ad infinitum. He has not.
You can see how I tried to get Clem a fatwa (it may still happen) here
Clem asserts in this article that: “My friend Bernanke has done us all a favour with QE3. He is pumping money into our portfolios. What a nice guy! It will all end in gnashing of teeth but if you see that coming you can doge that bullet when it comes in 2014-15.”
Not correct Clem. Bernanke, whichever crook runs the Central bank of China, the BofE and Mario Draghi are all printing money. Who are the winners and who are the losers (I note Clem’s use of the word “all.”)
Winners.
1.Wall Street banksters. More bailouts, sugar rush for the markets – bonuses all round.
2. Short term speculators, equities have shot ahead on the news. But this is a short term and temporary gain.
3. Those in debt. The debasement of currency will reduce the real value of their borrowings. The imprudent will be rewarded as .long as they can service their debts when interest rates rise (as they must do as a result of inflation).
Losers
1. Those on fixed incomes/with cash. The real value of their income/.cash will be eroded. Their prudence will be punished.
2. Long term equity investors. Inflation pushes corporate earnings ahead but equities will be de-rated. Companies with little pricing power will be crushed.
3. The unemployed. No real jobs will be created. Indeed capital will be misallocated so real jobs will be lost and bogus ones created.
4. The third world and the starving billions. Prices of basic commodities will be pushed higher. (See the start of the Arab Spring and QE2). Folks will starve to death.
And so the short termists, the banksters and the imprudent gain. The poor, the elderly, the prudent, most investors and the starving third world lose. Ben Bernanke may be Clem’s pal but he is not the friend of most of us. It is not as if QE1 or QE2 had actually worked. Real US unemployment is still at 1930s levels, the Government debt and deficit is at record levels why does Clem’s mate reckon QE3 will work any better than QE1 and 2?
Tom, as far as your winners and losers list you may have the moral high ground here, but punishing the prudent most of us imprudent people feel much better. The other groups you mentioned fall under the category of either out of sight / out of mind, or as long as I’m Alright Jack…, and so on. We may not like it, that is human nature in the early 21st century.
Mr Banned Blogger
There are stacks of folk (as far as I can see 99% of the population where my dad lives and I am now) who are old or who have paid off their mortgages and have no debt.
They and others may be out of sight/mind but they do exist.
And inflation causes capital misallocation, in the end we all suffer!
Enjoy your imprudence while it lasts
Tom
I am not the imprudent one, and would have never reduced interest rates below 5% or bailed out the banks.
I believe that QE “mortgages recovery” and leads to an extended economic stagnation.
Indeed, the best policy would have been to allow a proper financial collapse in 2007 – 8, so that by now a proper recovery would be on its way. Capitalism works best as boom / bust.
Somehow idiotic Keynesian thinking came in during 2007 with the idea that if the financial system was not rescued there would be social unrest. Now will will get both social unrest PLUS a bust financial system. Nice.