How likely is QE-Three?

By Gonzalo Lira

If foreign sources of funding will not cover the Federal government’s deficit after June 2011, and Washington will definitely not cut spending in any sort of realistic sense, then there really are only two—and only two—possibilities:

• The indefinite continuation of QE by the Federal Reserve.
• Or the requisitioning of private retirement accounts and pension funds.

Don’t dismiss the second possibility out of hand—think it over.

What pool of money is just sitting there, not doing much, while being legally barred from its owners? What pool of money is easily accessed, yet is large enough to fund the deficit?

The retirement accounts of the American people: Both individual private accounts, and pension funds.

After all, the total for all pension monies is roughly 100% of GDP (this includes Social Security). And the Federal government has already raided the “Social Security lock box”—that box is stuffed with Treasury IOU’s.


How likely is QE-Three?