Let the flood gates open

QE3 has started.

Bernanke announced that starting Friday, September 14th, Federal Reserve will pump some $40 billions dollars into the market every month. Unlike the previous rounds, there is no definitive end date for this. The Fed will continue until the economy has recovered.

The USA will enjoy very low interest rate, like zero, for a long time. The long term interest rate will be low for a long time. Individuals and companies will start borrowing money from their banks. They will then spend or invest those money for something enjoyable or yielding better return than interest rate. This should directly improve real estate market and boost stock prices. If this cause inflation, that will be just fine with the US. Inflation weakens the currency and stimulates export. That’s exactly the result the government hopes. Obama should be a happy candidate with this news.

Many can play this game. China, Japan, and Euro zone were all waiting. Probably immediately, but with less fanfare, they will all starting to print money. The only question is how much and how fast. Yes, the world will soon be flooded with money. The years of prosperity will soon be upon us.

Only fools will save money, since inflation and low interest rate will eat your savings away. Invest is the word. There is no risk, since money is free.

Until the last fool stumbles, that is. Then the whole thing will be crashing down. To prevent that, the money spigot cannot stop, only slow down, and very gradually. That’s called soft landing. We did it before.

Isn’t it cool to be part of an experiment?