Matthew Bishop, the US Editor of The Economist was recently interviewed by the Wall Street Journal TV. During that interview, Mr. Bishop predicted that governments will soon debase currencies such as the “paper dollar and “paper euro” “in a big way.” He said that the weaker than expected March unemployment report is leading to further Wall Street demands for more stimulus plans and that Wall Street’s addiction to debt is leading to the continuing debasement of the dollar. Further Quantitative Easing (QE3)—which, incidentally, will support the price of gold—is virtually inevitable.
The slogan “QE3 to infinity” has caught on among gold gurus. They argue that QE3 must start soon and essentially continue until the US economy crashes.
Richard Duncan, author of The New Depression: The Breakdown of the Paper Money Economy argues that Federal Reserve Chairman Ben Bernanke will continue to “stimulate” the currently listless economy with massive infusions of fiat currency. Therefore, “For the year 2012—Expect QE3.”
However, while I don’t doubt that there’s a QE3 in our future, I’m unconvinced that we’ll see QE3 this year. But before I explain why, let’s explore the meaning of QE (Quantitative Easing).