Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

Printing Money Is Easy Short-Term Medicine for the Economy That Becomes Long-Term Poison in the Form of Inflation

With current inflation low, the value of our money is in no immediate danger. The trouble is, we have a multibubble economy on the way down, including a slow economy caused by a global financial crisis that hit in late 2008, from which we have not recovered. Faced with so many falling bubbles (stock, real estate, private debt, discretionary spending), the Federal Reserve had to do something to try to rescue the economy and its bubbles. In a bold move that helped spare us immediate, but not long-term, pain, the Fed began in early 2009 to purchase almost $2 trillion in U.S. mortgage and treasury bonds with printed money in an effort to help stimulate the economy. The technical term for these big bond purchases is “quantitative easing” or QE, but in plain English it simply amounts to printing a whole lot of money.

The Fed’s first round of bond purchases (QE1) massively increased the U.S. money supply from $800 billion to $2.4 trillion—an unprecedented 200 percent increase. More recently, in November 2010 the Fed began more bond purchases (QE2), adding an additional $600 billion to the nation’s money supply over the following eight months. And, there is a very high likelihood of even more QE to come.

The goal of the money printing is to stimulate the economy back to health, like trying to jump-start the stalled heart of an otherwise healthy person. The trouble is, the falling ...