FED QE IS BAAAAACK!

BY BILL GRIFFO

December 15, 2025

Hey Income Hunters,

The Fed’s Dirty Secret: QE Is Back …

And While the Fed, the financial media, and the economic priesthood will call it “technical operations” or “reserve management,” the truth is far simpler:

The Federal Reserve just restarted Quantitative Easing (QE).
Not kind of, not sort of, not maybe.
QE — as in new money creation — is back.

And like every major liquidity pivot, it will reshape asset prices, inflation trends, and long-term portfolio strategy far more than a simple rate cut ever could.

This is the exact pattern we have been warning about for months and when the system wobbles, the Fed always returns to the same playbook — print, pump, pacify.

What actually happened, why it matters, and what long-term investors must do now.

The Fed Announced $40 Billion in T-Bill Purchases — But That’s Only the Start

At the December meeting, the Fed quietly slipped in a bombshell:

1) $40 billion in Treasury bill purchases in December — with “elevated” buying to continue for months. That’s not reserve smoothing. That’s not plumbing maintenance.

That’s QE.

When the Fed buys bills, they don’t shuffle existing cash around — they create brand-new bank reserves out of thin air.

New money. New liquidity. Bigger balance sheet. That is the definition of QE.

The media is twisting itself into pretzels calling this:

“Technical adjustments”
“Liquidity management”
“Bill reinvestments”
“Reserve optimization”

But as we like to say:
If it looks like QE, quacks like QE, and inflates financial assets like QE… it’s QE.

2)The U.S. is running out of buyers for its debt.

Foreign demand is fading thanks to:

Uncertain yields
Persistent inflation risk
Geopolitical fragmentation
Concern about excessive U.S. deficits

The Fed had no choice but to step in as the buyer of last resort.

3) If the balance sheet grows and liquidity rises, it is QE.

And yes — the Fed balance sheet will begin rising quickly.

4) What Comes Next: The Two Red Flags Investors Must Not Ignore

#1 – A Banking Liquidity Crisis Is Closer Than Advertised

Banks are sitting on:

Massive unrealized losses
Illiquid collateral
Shrinking deposits
Tight lending standards
Reluctance to participate in repo markets

The Fed is buying bills not because markets are healthy —
but because they aren’t.

#2 – QE Always Ends the Same Way: Higher Inflation

Every time QE returns, the sequence is identical:

Markets cheer.
Liquidity rises.
Inflation follows with a lag.
Real wages fall.
The dollar weakens.
Asset owners get richer…
…and the middle class gets squeezed.

If you thought 7–9% inflation was painful the last time around, imagine what comes after trillions more in stealth QE.

Market Impact: What to Expect in 2025–2026

Short-Term: Blow-Off Top (Asset Inflation Surge)

Higher stock prices
Tighter credit spreads
Lower volatility
Speculation in tech, crypto, and commodities

Medium-Term: Inflation Spike + Policy Panic

Supply constraints
Energy bottlenecks
Geopolitical stress
Massive Increase in Supply of Dollars
Higher velocity of money

What Long-Term Investors Should Do NOW

As we always say: You can’t control the Fed, but you can control your allocation.

Here’s the Power Income strategy as QE quietly reignites:

I added to our Gold holdings this week – Gold, silver, commodities, and bitcoin historically outperform in monetary expansion cycles.
I am buying Treasury Protection Securities (TIPs) this week – Long-term investors should sell Long-term bonds to buy TIPs. You can buy TIP ETFs (TIP) as well

If inflation returns — and it will — long bonds will get crushed …

Meanwhile Inflation protected securities will rise in value and investors will be paid dividends that compensate you for the inflation via the CPI Index …

Keep Dry Powder for Market Dislocations

Late-cycle QE creates sharp, fast opportunities when things break.

5) Watch Fed purchases vs Foreign Investors