Michael Pento: QE3 Is Inevitable

Michael Pento makes a number of interesting points about the Federal Reserve’s balance sheet and the possibility of QE3 in this video.  Some of the points he makes include:

  • The Fed can’t aggressively sell it’s mortgage backed securities, they won’t be able to get the money back they paid for them.  This means the money they pumped into the system will probably just stay in the system.
  • Bernanke will likely wait to construct QE3 until economic data gets worse (which is already starting to happen)
  • The Fed has no easy way out of this.  If they tighten they risk deflation but if they continue to print we will eventually suffer massive inflation.
  • The total debt in the system between government, businesses, and households has never been higher in the history of this country.  This includes as a percentage of GDP and in nominal terms.  When you pay down that debt you get deleveraging and a shrinking economy.

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