Ritholz: QE3 here already?

Barry Ritholz writes about the Bank of Japan, injecting the equivalent of QE3 into the system with its post earthquake intervention (link).

I express some of my thoughts about QE2 a couple of weeks ago, on the PCGS Precious Metals forum (link2).

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I can't explain it [QE] in simple terms. It is not an easy topic. Intuitively, I know that printing money to buy Treasury bonds is a very dangerous game. It is a complicated game, where the players, don't have a good grasp of what kind of genie they have let loose on the land. I read a New York Times article about the team that does the actual buying and how and when they do it. Would it trouble you to know that the team consists of six 20 somethings? That the oldest person on the desk that does the daily buying of bonds and notes that will eventually total $700 billion is 29 years old? Well, it bothers me.

QE is playing with fire, and there is a chance that the house (the entire financial system) might burn to the ground. Again, one unintended brush fire from the policy is record food and commodity prices as well as recovery highs in the U. S. stock market. Food riots are starting to break out in the poorer countries. Is there cause and effect? Some would say no, but we won't know the history until it is written. If things go badly, historians may look back and blame QE and qe2 as the catalysts to massive starvation of hundreds of millions of poor people all over the world. That's the magnitude of the kind of fire they are playing with. If things go badly, QE might be viewed like the Treaty of Versailles (ending World War I) and the punitive reparations demanded which had a long term cost. When that war ended, very smart people sat down and wrote out the terms. It made logical sense to them.

Humans are capable of incredible financial folly. That you and others don't see a problem doesn't mean there isn't a problem. Quantitative easing is almost certain to have a long term cost. We don't know the price yet. Those in charge don't know the rules of the game. The rules of the game are being made up as we go. I see QE as a genie that has been let loose on the land, and the price wasn't negotiated when he was set free. The genie isn't going back into the bottle until his price is paid, and that price may be high, and there is the chance it may involve blood.
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