Economist and Hedge Fund Manager Shayne Heffernan of takes a look at QE4

The Federal Reserve is now planning QE4 as QE3 struggles to lift the US Economy. QE4 will not save America and will only worsen the impact of QE3.

What QE4 really represents is the continued trade war on China.

Low interest rates do not matter if banks are not lending to consumers and small businesses, and corporations that are able to borrow money will not lend or invest it. What ould be more effective is to make life easier for small business by dropping regulations and barriers to entry. Removing the rules imposed on banks under the ridiculous Volcker and Dodd-Frank legislation would also help.

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The greatest beneficiaries of the lowest rate policy are the corporations that need money the least, so how does that help?

Lower interest rates do not provide a sufficient reward to lenders for taking on riskier loans and home mortgages. Therefore home mortgages, consumer loans and small-business loans may be easier to get if rates were higher. Obama’s war on Banks has not built a great economy, it has reduced the level of activity and risk banks are willing to take, small business is one of those risks.

By keeping short-term interest rates pegged near zero and pushing long-term rates below 2%, the FED is advertising that it has no faith in the recovery. If it does not have faith in the economy, they why should anyone else have confidence? It confuses me no-end that when the economy is so bad that QE3 seems justified that the market would rally, why? If the economy is in such a state that intervention is needed that is not an environment to invest in at all.

The Federal Reserve is mulling additional asset purchases next year to boost jobs amid a fragile economy despite 3 rounds of quantative easing, the minutes of a policy meeting released Wednesday showed.

With the current $45 billion a month “Twist” asset adjustment program scheduled to end in December, the minutes suggested that the Fed was ready to go ahead with more outright bond purchases, aimed at pushing long-term interest rates lower.

“A number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension program in order to achieve a substantial improvement in the labor market,” the document said.

A new program would overlap with the “QE3″ open-ended $40 billion a month asset purchase program announced in September.

Participants at the central bank’s Federal Open Market Committee on October 23-24 discussed the impact of its longstanding near-zero interest rate policy and other measures aimed at helping the US recovery.

At the meeting, the FOMC stayed the course on policy, but the FOMC minutes revealed divisions over monetary policy, including concerns that low rates will unleash inflation and questions about the effectiveness of massive asset purchases, or quantitative easing.

Participants generally agreed that in determining the appropriate size, pace, and composition of further purchases, “they would need to carefully assess the efficacy of asset purchases in fostering stronger economic activity and consider the potential risks and costs of such purchases.”

Participants were meanwhile undecided on whether the Fed should set explicit targets for unemployment and inflation to better indicate when it might raise interest rates.

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To save America in my opinion.

The U.S. debt is more than $16 trillion and although it is widely reported that China is the biggest owner of this debt that is not actually true, the biggest holder is the American Taxpayer, the single largest holder of national debt is the Social Security Trust Fund.

The Social Security Trust Fund is just the start of America’s long term problems.

American Corporations and Banks face increasing competition for global resources and income, by filling the US Banks with money Bernanke is empowering them to launch what might be the greatest Corporate expansion in history, in a continued trade war with China.

China and the United States are the world’s two largest economies, arguably each others most important trading partners and rivals. American Politicians say the low value of the RMB has kept Chinese exports very cheap, and gave Chinese businesses an edge in competition with U.S. companies.

One way that China keeps the currency value low is by using its trading profits to buy up U.S. Treasuries. That helps to keep the cost of borrowing low for the federal government and for U.S. businesses and consumers.

Unfortunately, like all disagreements, the truth is not black and white, but shades of gray. While there may be incidences of violations by the Chinese, the issue is complicated by the fact that there are just as many grievances levied against the U.S. by not just China, but by many other countries charging U.S. with hypocrisy when it comes to global trade practices.

But the value of the RMB/USD will be helped by QE3, it is not the big game, the big game is owning and controlling the essence of the global economy, food, minerals, banks. These 3 sectors are the core of modern human existence.

China and the corporations of China under the 5 year plan are directed specifically to secure food, raw materials, energy and stability for the Chinese Nation, QE3 and QE4 are in my opinion aimed at allowing US companies access to the funds to compete at a global level in the acquisition of these resources at the expense of internal inflation and other by products of Quantitative Easing.

With an impressive uncatalogued of overseas investments, deals and ripening relationships, China is planning 50 years ahead for its own supply of the finite commodities. It is leaving every other country stranded on the starting line. Some of them are even facing backwards.

Bernanke is the first Westerner to answer the challenge.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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