Tuesday, December 4, 2012

Goldman Sachs expects Fed to Announce QE4

Goldman Sachs expects, next month, for the Fed to come out of their policy meeting announcing QE4. It will be a purchase of $45 billion each month in Treasuries. This number will be in addition to the already existing QE3, which is $40 billion per month in mortgage-backed security debt.
Goldman expects this to continue all the way into 2015. So we are looking at close $2 trillion of QE over the next couple of years. Keep in mind this is already in addition to the $2.5 trillion of QE1 and QE2. We are talking about close to $4.5 trillion which has been and will continue to be manufactured out of thin air in order to keep interest rates artificially low.

But will this fix anything? Unfortunately it will not, at least according to Paul Volcker….

“Another round of QE is understandable – but it will fail to fix the problem. There is so much liquidity in the market that adding more is not going to change the economy.”

This is the “most extreme easing of monetary policy” he could recall. Mr Volcker’s comments came as the World Trade Organisation intensified the economic gloom by slashing its global growth forecasts.

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