Quantiative Easing Will Continue

I've been reading lots of financial articles online in the mainstream media about the federal reserve eventually tapering off QE. If you dont know what QE is, essentially they are printing money to buy government bonds to keep low interest rates for the U.S. government.

Now this is virtually impossible, given that the federal reserve is buying up a large portion of all treasuries. The real question is, would you loan the U.S. government money for 10 years earning about 2%?  I doubt it, I mean inflation is going to be much higher than that given that Bernanke wants to continue to print money. Nobody would be dumb enough to do that.

The media has not really been talking about the U.S. debt. A majority of the U.S. debt is in treasuries which is short term debt. They are basically on a adjustable rate mortgage and when interest rises (its practically a guarantee it will happen), the question is, what will the federal reserve do?  Will they print money to buy up all the bonds? the correct thing to do would be to let it rise and the U.S. would have to go austerity, but that would be highly unlikely. Can you imagine the events that happened in Europe happening in the United States?  There are 47.6 million people on food stamps, imagine if these people were not able to continue to receive these benefits.

With the media saying that the U.S. economy is on the upswing, once these banks with all their excess reserves, begin to lend money out to small business, that is when you will see the velocity of money begin to increase. Currently, banks are not lending money out and because of this, we have not seen inflation increase. Once this happens, you will see consumers begin to bid up prices and this is when it really gets interesting.