Ben Bernanke, Chairman of the Federal Reserve recently launched QE3, the third round of federal stimulus. Many financial advisors are predicting that QE3 may be the straw that breaks the camel’s back.
The first federal stimulus, QE1, was launched November 25, 2008 and lasted 17 months, ending March 31, 2010. They spent $100 billion per month on mortgage backed securities for a grand spending total of $1.7 trillion. QE1 was so successful that gas rose 57% from $1.75/gal. to $2.75gal. and gold rose 55% from $725/oz. to $1,125/oz.
The second federal stimulus, QE2 was launched November 3, 2010 and lasted 7 months, ending June 30, 2011. They spent $85 billion per month buying mostly U.S. treasuries for a total of $600 billion. QE 2 was almost as successful as QE1. This time gas rose 28.5% from $2.80/gal. to $3.60/gal. and gold rose 28% from $1,325/oz. to $1,700/oz.
The first two stimulus plans had time and spending limits. QE3 does not!
Under QE3, the Feds will be spending $85 billion per month. They will be purchasing $40 billion worth of mortgage backed securities and $45 billion worth of U.S. treasuries per month. This will continue until such time that the labor market improves. In other words, there is no time limit or spending limit on QE3.
According to some financial experts, QE3 will cost $1.17 trillion by the end of December 2013 raising the federal balance to a total of $4 trillion. By the end of 2014, it will surpass $5 trillion and by the end of 2018, if the labor market does not improve, the federal balance will top $28 trillion.
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