Why QE3 (QE Infinity) Will “Work” Part 3 — 11 Comments

  1. Jack,
    Big fan of TSP, thanks for the videos. I appreciate your perspective on the long term economic stuff. I thought the series you did on downward class migration was particularly good. It put to words something I had been kind of noticing but couldn’t really explain to anyone. Like how I make twice the money I did 10 years ago, but don’t feel like I have twice the buying power, more like 30% more maybe. I used to just grunt and say “inflation”.

    Thanks for all your hard work.


  2. If you take the ratio of the price of the DOW compared to gold back in 2001 it was 40 to 1. Today it sits around 7.5 to 1. It would take a price level of around 70,000 for the DOW to be back at 40 to 1. That is what is referred to as an invisible crash. My grandfather in Mexico back in the 1993 reset had his retirement wiped out overnight. At his age with no backup plan he had run out of time. He couldn’t rebuild. Those who were of young age had the time to rebuild. But the Mexican government continued to devalue from that point and on. Results you saw the people leave the country, the gap between the rich and the poor widen further and civil unrest as you see on the news today. I have family that I visit out in framing areas of the country and they are a lot safer than the cities.

  3. We (well most of us) are looking at take advantage at this situation. My problem right now is should I do one of the following:

    1. Do nothing, keep saving, keep preparing slowly.
    2. Move primary mortgage down to 15 year. Cost more (per month), out of debit a lot faster, and a lot less interest.
    3. Use ultra-low rates and buy my retreat on a 15 year deal. Hopefully be able to sell primary mortgage some time in the future.

    I know that here (not a financial advisor, don’t tell you what to do), but this is still the question. Do we take

  4. Ok Jack, thanks for the videos and podcast about this, I’ve watched and listened to all of it and still have a question. How do the banks keep up the supply of loans going to the Fed if they aren’t putting all the money they got from the Fed back into loans? Wouldn’t there be a shortage? If a bank takes 40 billion from the Fed and puts 30 billion into gold and 10 billion into new loans, when the Fed comes around the next month with 40 billion more I think there would be a shortage. Unless the banks have so many loans on the books now that it is not a problem. Sorry if this is a dumb question, but I don’t know the answer. Thanks Jack, love the podcast.

    • Oh wait, I think I figured it out. They don’t need 40 billion to loan 40 billion, because the loan creates more than enough to cover the difference. Is that right?

  5. They do it by expanding the money supply. The truth is, if you look at history, the economy grows when the money supply is expanding. The economy shrinks (contracts, aka,, recession or depression) when the money supply is contracting. Too much expansion creates a recession, however.

    The intrinsic value of paper money really exists. Lots of people argue that paper money doesn’t have intrinsic value They are wrong. The value of paper money is its portability and liquidity, which makes it great as a medium of exchange. That is it’s intrisic value. The only value I see in precious metals in genenral, is its traditional role as an inflation hedge. In a normal economy, when the economy is doing well (growing), the value of gold is reduced. Cash is king. In times of uncertainty, the value of precious metals grows. I would like to say at this time that anyone that doesn’t like worthless greenbacks can send them to me. Just leave a message in this blog and I will send you my email address with further instructions (LOL!)

    There is a real problem we do face. Anyone who is not alarmed probably has more money than common sense. I can thing of several multi millionares at this time that fit in this category. If you are in the middle class, you should be afraid. Your wealth is being destroyed by the weathiest americans in this country every single day. They pretend to be your saviors, These pied pipers of prosperity are destroying your future by transferring the wealth of america to every other country on the planet. One day we will all wake up and nothing in america will be owned by americans anymore unless you act together to stop them.

  6. Jack,
    The video does not seem to be working for me… Are you having any other reports of problems? It does not work on or youtube.
    Loved the first 2 videos, keep up the good work.

  7. Great video Jack. You are spot on about this being a long term problem. thanks for all the great info you put out and all the hard work it takes to come up with it.

  8. Is QE3 really just a giant money laundering scheme? See here:

    What’s more likely:
    1) Financial elites are total morons and actually think QE3 will have some positive effect ‘for the country’?
    2) It benefits them and furthers their goals

    As a ‘conspiracy theory’..
    Move all the shit paper from the member banks onto the Feds balance sheet, receiving dollars and investing them elsewhere. Demonize the Fed and insist that it be ‘nationalized’.. with the US ‘buying’ it from the member banks at ‘book value’ (We CAN’T just nationalize it.. that would be COMMUNIST!) preferably with hard assets (gold?). Dollar goes hyper and collapses. Member banks propose the FED v.2 to ‘save the economy’ with a gold component (which they have and the government doesn’t).

    😉 – not that crazy really.. member banks get paid 3x and get all the money when the game resets.

  9. Great vids.
    In light of the banks purchasing gold over the near term future; are they buying silver too? Does this change your advice concerning buying silver over gold? Will the banks puchases of gold increase the chances of a gold bubble that pops harder than silver values?