Perma Bears Declare: Expect QE 3.0

Popular Perma Bears of different persuasions have jointly declared “QE3 is gonna happen!”

I am no perma bear, but a realist. Although this time I’m on their camp with regards to the prospects of QE 3.0. [pardon me for this seeming appeal to authority, my point is to show that even different ideologies or perspectives can come up with same conclusions]

From the Wall Street Journal, (bold emphasis original)

How’d you spend your weekend? Some of the biggest (and most bearish) guns in economic and market prognostication put their heads together at a small confab on Lake Winnipesaukee in New Hampshire this past weekend. In attendance: David Blanchflower, formerly of the Monetary Policy Committee of the Bank of England; Swiss doom-and-gloomer Marc Faber; Fred Hickey, the bearish editor of the High-Tech Strategist newsletter; Morgan Stanley exec Stephen Roach; and economic forecasters David Rosenberg, Nouriel Roubini and Gary Shilling.

Their conclusion: QE3 is gonna happen! Ed Yardeni, who was there, had this little insider snippet for readers of his daily newsletter (emphasis is MarketBeat’s):

“The conversations were spirited with lots of debates. The consensus was quite pessimistic about the outlook for the US and global economies.

“Everyone seemed to agree that the Fed would most likely leave the federal funds rate at zero for a long time and that a third round of quantitative easing is likely later this year. David Blanchflower, who is a former member of the MPC of the BoE, is in favor of QE-3.0. The rest of us were against it. Most agreed that it would probably boost stock and commodity prices again, though not as much as QE-2.0.

Not that I like it, I think QE is wrong and immoral.

But that’s the way the US political economy has been structured, and that’s how events will likely play out. As earlier pointed out, it’s not just the US but every developed nation’s political leader’s guiding principle or path dependency to policymaking.

The role of the prudent investor is to take advantage of this silliness. As investment guru Doug Casey writes of government interventions,

All such distortions have consequences, and one of them is to create opportunities for speculators.