Quote du Jour: Russell says QE2 is “vomiting out more paper”

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Readers often ask me about Richard Russell’s (Dow Theory Letters) comments on topical issues. I though you might be interested in his take on another round of quantitative easing, as quoted below.

“By the way, it’s now a given that the Fed will embark on QE2 (i.e. vomiting out more paper). An indication of neurosis is if someone does the same thing over and over again, but each time expects a different result. That applies to the pathetic actions of the administration, the Treasury and the Fed. Just keep churning out the money, and maybe you can generate some more inflation and some more leveraging. It didn’t work with the first $1.7 trillion and it won’t work with the next trillion, but trying, guys, and maybe this time it will be different.

“Of course, the first QE did what it was supposed to. It saved the biggies that we were told were ‘too big to fail’. I never believed the ‘too big to fail’ propaganda.

“From the beginning I insisted, ‘Leave the bear alone, and let him do his intended work.’ His work was to let fail the Wall Street outfits that were too big to fail. That plus to eliminate years of Fed-created money printing, while at the same time deleveraging the bloated US economy.

“The US has been enjoying phoney prosperity ever since World War II – it was ‘prosperity’ based on inflation and leveraging. Bear markets are supposed to clean up the mess, but Obama, Geithner and Bernanke thought differently. Worse, I think they still believe they can tame the bear with massive infusions of Federal Reserve Notes and zero short rates. Total dim-wits and neurotics to the very end.”

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