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What Latest Fed Move Means for ETFs

Bad for China.

Wait! it is good for China.

See, China will stop feeding the US with cash in order for the US consumers to be able to buy more products from China.

Therefore, China is going to expect lots more income deterioration from it's export-oriented industries.

Therefore, China will have to step up it's own economic programs as fast as possible before their export earnings deteriorate and not be capable of sustaining their economy to it's current elevated levels.

This is going to create a new breed of consumers in China with more sophisticated tastes than what they have now. We know most educated and informed Chinese would like to live like the over-indulgent Americans so they ramped up their exports in order to be able to create new wealth. There are hundreds of millions of them now. But only the few and the privileged class were able to do so because of the high capitalization cost needed for export oriented businesses. If China ramps up it's recovery program by developing it's own local consumer-based economy much like the US of the 50's to 90's; then it can result in a more than half a billion "new" breed of consumers from the ground up since even those that are not well capitalized will be able to create their own small businesses in China that will cater to their local customers.

With China spearheading the accumulation of wealth by creating a new breed of local-based consumer economy; India and the other smaller developing countries are going to follow the lead and start changing their national focus from export-based economy to home-grown economy. This is going to hasten their transition from being developing countries to fully developed countries much like the United States and Germany and Japan. Being small, young and nimble; these developing economies are capable of bouncing back to normal health in a much shorter time than the US and Europe.

In the long run; the United States, as soon as it is able to solve current economic crises; will be able to export more products into those new-breed consumers of China, India and other developing countries as their economies started to gather signifcant progress with their own local-based economies or rather self-sustaining economies rather than export-based economies.

How could the US be able to compete with cheap labor? Perhaps robotics. The United States will have to ramp up it's factory automation capabilities in order to be able to offset high cost of local labor. In the long run, as the developing countries start gaining status as developed countries or near-developed countries; their local salaries are going to increase and start approaching Western standards.

This is not bad for the United States. As soon as the US is able to get out of this hell-hole called severe recession and be able to prevent the onset of depression; the administration, together with the international companies, will have to start formulating new strategies for a new breed of export-oriented industries that will be able to sell new or existing products to China as soon as the first signs of growing local-based consumers in China starts to appear.

This latest gargantuan move by the Fed may prove to be a blessing in the long run since the United States is not expected to be able to revive it's own economy based on the old reliable consumerism industries as it's own population starts entering retirement age and is therefore not capable to sustain a booming consumer-based economy.

Two birds in one shot. Shoot deflation straight through and through with enough force for the arrow to bounce back and solve the deteriorating export income of the US in the long run.

Is this not possible or just a pipe dream?

Helicopter Ben Turns into Ballistic Missile

Just about darn time we see some ACTION.

America does not want to spend.
America does not want to invest.

Understandable considering what we have gone through.

Result is deflation and a spiralling bankcrupcies specially small scale businesses such as retailers. Deflation will feed on itself and depression will be the result as more small to medium size businesses go bankcrupt.

This action of the Fed is considered by many as highly inflationary. Exactly what we need to combat deflation and depression! Do we have any other "better" solution to combat deflation?

The sooner consumers and investors realize that if they keep hoarding their cash believing that Cash is King during deflationary period; they are going to lose in this gambit as the Fed is going to force inflationary pressures into the economy and thus those hoarded cash will start losing value as inflation rears it's ugly head.

Consumers will have to spend, moderately not excessively as before, in order to support the economy which is 70% dependent on consumer spending. Excessive belt tightening will only result in massive company bankcrupcies as 70% of them are dependent on consumer spending for their survival. The US economy does not have a "golden parachute". It will have to make do with what it has which is a Consumer-based Economy. Deflation is going to destroy that economy with impunity.

Business investments are needed right about NOW. We are losing more than half a million jobs per month. There is no way the economy is going to recover without new capital. There will be no new capital if investors are hoarding their cash in a deflationary environment. They are going to be forced to find alternative investments if they want to protect their cash from the threat of inflation.

Lets worry about inflation later on. Solve our current problems not potential future problems. The Fed has a lot more experience fighting inflation and very little or no experience fighting deflation and depression.

We are afraid of inflation because of our past experiences. We don't know what deflation and depression will do to us since we don't have any experience at all in this type of environment. We don't know what we are going to lose if deflation takes it's roots and depression sets in.

We better listen to people who have the knowledge if not the experience of how bad deflation and depression can be.