QE3, 4, 5, 6...

As the Federal Reserve continues to engage in QE2, which is set to expire sometime in June of this year, you can't help but wonder what the Fed's intentions are after QE2. Ben Bernanke has recently told the press (several times) that the Fed will no longer be engaging in money-printing known as QE, after QE2. I think this is a bold-faced lie from the Fed - either that, or complete ignorance on their part - and in this blog I explain why I do not think the Fed will stop with QE after QE2.

QE is like life-support for our economy, and if the economy is taken off of that life support it is sure to plunge. This is fact: large-scale money-printing from a central bank guarantees the demise of the country that central bank regulates the money supply of. Look at the history of countries whose central banks printed money excessively and it is apparent. Yes, as the USA is seeing right now, there may be a period of what may look like prosperity for the country's economy when its central bank prints enough money, as jobs are created and companies appear to improve. This is a period of an illusion of prosperity, though, and is guaranteed to end.

The economy having a sharp downfall is precisely what the government officials currently working in Washington do not want to see. Adding to this, the government officials want to get elected another term. Most of the government officials in Washington, I'm willing to say 95%, are motivated in the actions they take mainly by what will keep them in favor with the public and their constituents, and ultimately take those actions which will get them elected again.

Which brings me to my next point: the government officials currently in Washington do not want to see the QE ended because they know the effect will cause the economy to go through a deep recession, which has been delayed by the QE itself. The Democrats in the White House are running for reelection in 2012; do you really think they want the economy to be in the crapper between now and election time? The answer is a resounding no.

Having said this, Washington is going to encourage the Fed (or even mandate) that the Fed provides more QE to the economy. Some of this may go on behind the scenes out of the public's view. I expect to see the QE life-support for the economy in the form of QE3 after QE2 is complete.