It's becoming obvious now. Even as the U.S. economy shows some signs of growth, some call for further quantitative easing. In the U.K., it only takes some slight weakness in GDP numbers for the calls of more QE to intensify.
In Europe, at the same time that Germany opposes straight QE, the ECB starts up a program that for all purposes is QE. I'm talking about the fabled LTRO.
Not long ago you could reliably bet against the U.S. dollar (UDN) as it seemed the worst QE offender, but then the British pound (FXB) got in the dilution game too, and now not even the euro (FXE) is free from it.
Where does it end? The answer seems to be "it doesn't." There's quantitative easing as far as the eye can see, and this quantitative easing, while making it possible to run huge budget deficits for a long time, also totally impedes any kind of economic restructuring that would make it unnecessary.
So, with the entire developed world committed to diluting their money, what can be expected? One would expect, not surprisingly, for money to be diluted. For it to be worth less, when compared to goods, services and assets. In short, in spite of the seemingly excess capacity in almost everything except oil, one would expect that this monetary deluge will, over time, produce inflation.
One would also expect that every dip in the stock market will be bought. Some dips might be smaller, some larger, but all will be bought within months at most, since that's also the largest timeframe that any central bank seems able to tolerate without acting.
This is relevant, because as I have written recently, I expect economic weakness coming from China. But, if the past being described here is prologue, any weakness that does take place, will, in a matter of months at most, be met with more monetary easing. Which means that after the initial weakness takes place one must, once again, go long equities.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
