{"id":7667,"date":"2015-04-29T05:41:14","date_gmt":"2015-04-29T10:41:14","guid":{"rendered":"http:\/\/olduvai.ca\/?p=7667"},"modified":"2015-04-29T05:41:14","modified_gmt":"2015-04-29T10:41:14","slug":"when-exactly-will-the-fed-launch-qe4","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=7667","title":{"rendered":"When Exactly Will the Fed Launch QE4?"},"content":{"rendered":"

When Exactly Will the Fed Launch QE4?<\/a><\/h3>\n

Money From Nowhere<\/strong><\/p>\n

On Friday, the S&P 500 and the Nasdaq closed at record highs. It\u2019s the first time both indexes have done so since December 31, 1999. Why such optimism? High profits, you say. But where do profits come from?<\/p>\n

Households have less money to spend than they did 15 years ago. And companies cannot make money just by selling things to each other. The only explanation is that customers \u2013 including the US government \u2013 continue to borrow and spend.<\/p>\n

Corporations borrow money to buy their own shares. Consumers borrow to buy products. Either way, the money comes \u201cout of nowhere\u201d and falls on balance sheets like manna from heaven.<\/p>\n

\"the-us-federal-reserve-board-building-susan-candelario\"The great money temple, from whence fresh pronouncements shall issue today. How long before it floods us with fresh money again?<\/p>\n

Photo credit:\u00a0Susan Candelario<\/span><\/p>\n

The Limits of Debt<\/strong><\/h3>\n

US households appeared to reach \u201cpeak debt\u201d in 2007. Now, the corporate and government sectors \u2013 not to mention students and auto buyers \u2013 are pulling up to their maximum debt limits, too.<\/p>\n

\"Household<\/a>Credit to US households and non-profits stood at $13.384 trillion as of March 18 2015 \u2013 still below the 2007 peak and declining in relative terms \u2013 click to enlarge.<\/p>\n

\u201cEverybody \u2013 including every corporation and government \u2013 has a capacity limit for debt,\u201d says Swiss money manager Felix Zulauf. \u201cOnce they reach capacity, they stop buying. Then the additional sales turn to additional inventories, employees turn to jobless statistics, and profits turn to losses.\u201d<\/p>\n

Maybe the cycle will reverse soon. Maybe it won\u2019t. But US corporate profits \u2013 already at record highs \u2013 can\u2019t go much higher unless: (a) wages rise, (b) consumer borrowing rises or (c) government borrowing rises. None of which looks likely.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

When Exactly Will the Fed Launch QE4? Money From Nowhere On Friday, the S&P 500 and the Nasdaq closed at record highs. It\u2019s the first time both indexes have done so since December 31, 1999. Why such optimism? High profits, you say. But where do profits come from? Households have less money to spend than […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[4365,175,195,303,305,1390,661,662,1138],"class_list":["post-7667","post","type-post","status-publish","format-standard","hentry","category-economics","tag-borrowing","tag-credit","tag-debt","tag-fed","tag-federal-reserve","tag-monetary-policies","tag-qe","tag-quantitative-easing","tag-stock-market"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/7667","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7667"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/7667\/revisions"}],"predecessor-version":[{"id":7668,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/7667\/revisions\/7668"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}