We’ll Never See Dow 10,000 Again – And Other “Good” Things

A guy I know for a long time calls up to bitch about my rants on Bernanke and the QE. He is a 2&20 Walls Street “buy side” type. He’s been at it for a long time. He says to me:

You don’t get it. Bernanke is giving you a once in a lifetime opportunity. He’s writing a put under the market. You’ll never see Dow 10,000 again. What the Fed is doing is a “good” thing.

This guy is coining money on the prospect of QE, he will probably rake in more when it is a reality. We shall see if this all works out, but one can’t argue the fact that from his perspective QE=Good. There are so many things that we contemplate as being “good” when in fact they are really not good. To me, saying,” QE is good” is like saying. “War is good for the Economy”.

-It is Good when the US pursues a beggar my neighbor policy of trashing the dollar. It is Bad when China manipulates its currency however.

-Laisse-Faire economics is Bad, Keynesian economics is Good.

-Price discovery is Bad, mark to model is Good.

-Balanced budgets and paygo are Bad, deficits are Good.

-ZIRP is Good for the economy, saving is Bad.

-A no downside risk equity market is Good. Bubbles however are very Bad.

-The Fed forcing inflation is Good. It would be Bad if prices were stable or went down.

-That QE and ZIRP undermine the dollar is good. When oil goes to $100 that would be Bad.

At the end of the day QE is going to raise the cost of living for every American. We face the double hit of homegrown and imported inflation due to the collapse of the dollar. The vast majority of Americans will be poorer as a result. But some fat cats earning 2&20 will make a bundle in a rigged market. QE will put the mother of all hurts on us at some point in the future. But for now it is a Good thing. And therefore we need more of it. And we’re certain to get it.

We need some leadership that cuts through the crap. It makes no sense to follow a reckless and dangerous policy that has the objective of enriching such a small portion of the population. The downside risks are large. We are in completely uncharted waters with monetary policy. The Fed is making a “Grand Experiment” with absolutely no consent from the people.

We can only hope that the next election brings a sea change of thinking. That would appear to be unlikely. While it is now certain that the “Ins” will be “Out” I don’t see a single voice in those who will step into leadership that is apposed to QE. Until that happens Bernanke will continue to brush off the warnings (from other Fed board members) and plod down a road that he is espousing as Good, even though he knows full well that it is Bad.