QE2 is an economic initiative launched by the Federal Reserve for a second round of “quantitative easing.” The ultimate goal of QE2 is to pump more money into our financial system to avoid deflation. So, when the weatherman says it’s going to rain, don’t fret, grab an umbrella. Preparation is the key…when you know for certain what may be lurking ahead, avoid and adjust…simple strategy.
7 Things that QE2 WON’T DO
Since the Fed recently launched QE2 there’s been a lot of talk both nationally and internationally about how the $600 billion program will impact the economy, the dollar, and Ben Bernanke’s credibility. Here are seven things it definitely does not do:
- Stop long-term interest rates from rising
- Lower the employment rate
- Lower U.S. corporate tax rates
- Reduce regulations that are “crippling” U.S. firms
- Make U.S. workers more competitive vs. foreigners
- Improve the U.S. education system
- Lead to a balanced budget
In the end, all QE2 will do is “wreck the dollar” and create double-digit inflation.
Why and How?
For the better part of a month, the financial-pundit-sphere has been debating the relative merits and efficacy of the recently enacted quantitative easing program. However, the debate has principally been centered on how successful the program will be on achieving the hoped for job growth and/or preventing a deflationary spiral, and on feared consequence of debasing the country’s currency relative to trade partners.
However, it entirely misses the point when addressing three of the biggest problems facing our country today such as:
- Collapsing housing market
- Declining tax base for cities/states/federal
- Vanishing retirement savings
Together these problems are leading to a vicious cycle of high unemployment and expanding deficit. Housing markets have slowed to a crawl, putting a freeze on homebuilding. Cities are running out of cash, canceling projects, laying government workers off, and taking payments from the feds. Boomers continue to work because they can’t afford to retire, thus are keeping the jobs they have or fighting for jobs they want.
What to do now ?
- Protect against rising long term interest rates by selling treasuries and potentially even shorting them
- Hold commodities like silver or gold, although do this in a tax-protected account
- Maximize your Roth conversion during the 2010 window of opportunity – the convertible taxes you need to pay today are likely to be less than the taxes you’d pay down the road. Also, the taxes you pay now on your conversion are in a sense an extra “contribution” to your tax advantaged investment accounts.
Need help implementing these strategies? Contact My Money Track.
