Despite hurricane Sandy hampering last-minute vote gathering efforts by Obama and Romney, the “cooking” of housing (“unadjusted”) numbers, and the likelihood that Bernanke (his term ends January 2014) and Geithner are getting ready to “run” the QE3 is not slowing down. In fact, the QE3 will most likely be increased from $40b to $85b per month even though Bernanke and Geithner will leave the cleanup for somebody else.
Although Obama and Romney are scrambling for last minute votes as November 6 looms on the horizon and Sandy certainly complicates matters for both candidates, when it comes to the QE3 it does not really matter who is elected or who plays puppet at the Fed, the economic end results will be the same. The U.S. will either print and inflate or crash: the U.S. is in too deep now and is beyond the point of no return.
The “proof is in the pudding”: QE3 (as well as QE1 and 2) is not working as the “firings” not “hirings” are the highest since 2010 with North American companies planning to eliminate more than 62,600 positions at home and abroad since September 1, 2012 (according to data compiled by Bloomberg), the biggest two-month drop since the start of 2010. Furthermore, if the recent “housing” numbers were true, the opposite trend would be observable but instead, firings total 158,100 so far this year with more than 129,000 job cuts in the same period last year in 2011.
Here is a list of just a few of the massive job cuts:
• Colgate-Palmolive Co. will cut 2,300 jobs
• 5,500 cuts were announced by Dow Chemical, DuPont Co. and Advanced Micro Devices Inc. (AMD) this past week
• Hewlett-Packard Co. announced 29,000 cuts in September
• Banks are eliminating more than 19,000 positions
• AMD, the second-largest maker of processors for personal computers, said last week it will cut 15 percent of its staff, or about 1,665 jobs
• Dow Chemical is shutting down about 20 plants in the U.S. and abroad, eliminating about 2,400 jobs
• Cummins Inc. said it expects to erase as many as 1,500 jobs by the end of 2012
So, if there are so many people being fired, where are the jobs coming from? And if people are losing their jobs, how can they afford new homes? Some argue that it is because the banks are lending at negative zero interest rates, which means that should translate into more easily affordable housing and a spike in housing demand, of course. But are the banks really lending?
Yes, it is true that the Fed is currently monetizing $40 billion in Mortgage-Backed Securities every month and keeping interest rates as low as possible in a plan to inflate housing. This should, in effect, work; low interest rates and swelling cash reserves causes banks to lend more freely. But if true, why is this not being reflected in the housing market? Banks are just too afraid of being sued to lend to new borrowers. But no matter what happens rest assured that the QE3 will continue and at an increased level: a combination of $85b per month in both MBSs and Treasurys, likely to be announced in December. And gold buying and repatriation of gold by central banks will continue as the world tries to prepare for the inevitable.
The U.S. public debt is now well over $16 trillion, which means US Debt-to-GDP, is now 102:94. In December 2009 public debt sat at $12 trillion. That means U.S. public debt has gained more than $1.3 trillion every year. The inevitable is not pretty for either Obama or Romney. So, although the QE3 is intended to “soften the fall” and may intermittently appear to improve the economy, neither hurricane Sandy or QE3 can stall or create a “soft landing” for what lays ahead: a cataclysmic economic crash that will rock the world.