In recent years, the Federal Reserve has attempted to project an image of decisive monetary policy, navigating economic shocks with a carefully calibrated combination of quantitative tightening (QT), interest rate hikes, and balance sheet manipulation. But according to macro analyst Peruvian Bull, that image is a dangerous illusion. What we’re witnessing, he argues, is not strategic mastery, but a slow and inevitable surrender to the forces of debt, inflation, and political pressure. In a world of chronic fiscal deficits and structural imbalances, quantitative easing (QE) is no longer a tool. It’s a trap.
The Debt Spiral That Demands QE
At the heart of the argument for “QE Forever” is the simple arithmetic of U.S. government debt. The United States is currently spending more than $1 trillion per year just to service its debt, and that figure recently surpassed the defense budget to become the second-largest federal expenditure. As Peruvian Bull put it,
“The gross interest expense is 1.1 trillion. Just servicing the debt. The defense budget is 1.087 trillion. So it’s bigger now.”
This isn’t just a headline. It’s a structural flaw in the financial system. Higher rates, which the Fed deployed in response to COVID-era inflation, have created a paradox: they were meant to curb price growth, but they’ve also exploded debt costs. That means any return to “normal” interest rates is politically and fiscally unsustainable. The government will either have to default on its obligations, gut essential spending, or monetize the debt. And that means QE.
Stealth QE Is Already Happening
Even as the Fed maintains its public posture of QT, Peruvian Bull reveals how monetary easing never truly ended. Through a variety of behind-the-scenes maneuvers — including manipulation of reverse repos, the Treasury General Account (TGA), and selective tapering of bond maturities — the Fed has effectively kept liquidity alive. This isn’t a conspiracy theory; it’s a mechanical reality.
“Their monetary mechanic was; let’s reduce the bills on the short end, or on the front end. Let’s increase or keep steady the long end. And since our overall balance sheet is falling, just because of the amount of decreasing the bills, no one will notice, right? No one will catch us doing this kind of monetary experiment. And you know, it works. Most people missed it, but, um, I caught it.”
By selectively allowing only short-term bonds to roll off while retaining long-term maturities, the Fed has quietly maintained balance sheet leverage. These moves, combined with a slow drawdown of reverse repos and strategic spending from the TGA, have injected liquidity without formally restarting QE.
In practice, net liquidity has remained flat for over a year. The implication is clear: the Fed never actually stopped stimulating. It just changed the method.
QE Is Now the Only Political Option
The final and perhaps most chilling reason why QE is permanent is political. The Fed operates within a system where elected officials must answer to voters, and voters don’t like austerity. With an aging population dependent on benefits, and a political class eager to stimulate growth and win elections, the pressure to keep the machine running will always trump long-term prudence.
That’s why Peruvian Bull believes QE is inevitable in any scenario that requires economic rescue.
“There’s never been a rate-lowering cycle without QE in the last 15, 20 years.” The fiscal math simply doesn’t work otherwise.
“And so just if we’re going by historical standards, we’re going to see much, much lower rates and much, much more QE eventually. The question is how we get there.”
In fact, the Fed’s recent move to slow the pace of QT — announced in May — was interpreted by many as the beginning of the next easing cycle. While not technically QE, this “creative maneuvering” was clearly designed to appease both markets and political expectations. As inflation slows, the Fed will be pressured to shift even more aggressively.
The real takeaway: the days of restrictive monetary policy are numbered. The political will to fight inflation vanishes quickly when markets crash or voters revolt. And without structural reform, the next crisis will force the Fed back to the money printer.
Takeaway: The Repricing of Reality
QE was once thought of as emergency medicine. Today, it’s a lifestyle drug — addictive, overprescribed, and deeply embedded in the system. Whether it’s through formal asset purchases or balance sheet sleight-of-hand, the Fed is on a path it can’t reverse. The illusion of control will persist, but as Peruvian Bull warns, the structural rot beneath the surface is worsening.
“We’re starting this next wave of inflation with 6% deficits to GDP. We’re already at wartime spending and we don’t even have a recession.” That’s not a warning. It’s a verdict.
For investors, this means one thing: prepare for volatility and currency debasement. QE isn’t coming back. It never left.
