Written By Parke Shall of Orange Peel Investments. (This post is an edited and abridged version of the original).

The financial industry…and financial news networks…[have been] discussing whether or not the government should be getting involved with quantitative easing (QE4) in order to slow down or try to prevent the fall in the markets…This idea is unconscionable to us and it absolutely cannot happen. Here’s why.

The signal that the Federal Reserve would be sending the equity markets if they were to start quantitative easing just months after their first interest rate hike would be a signal that they do not have a steady hand and cannot be trusted…[Currently] they have a plan and according to comments last week from NYC Fed chair Dudley, they appear to be sticking to…[it and] we applaud them.

Markets have to go down. That is how markets work. They go up when there is a boom and they go down when there is a bust but, at the end of the day, free market supply and demand must dictate the prices of commodities and equities, otherwise it is a rigged game. Not only does it become a rigged game if the Fed steps and again, but the Fed could be making things significantly worse. (Look at the state of China for example. China’s markets are in turmoil not only because they’re in a bubble, but also because Chinese investors do not trust the Chinese government. The Chinese government has tried to step in and stop the market plunge, and we think that is ultimately going to make things significantly worse for the country in the long haul.) The Federal Reserve needs to continue as planned with their rate hikes, and the investing public needs to remember that it wasn’t long ago the Dow Jones Industrials were at 7000. Even at today’s correction levels, we are still double what we were during the subprime crisis.

The Fed needs to recognize that oil is one of the big factors that is keeping the stock market down…it is basically moving in lock step with oil futures. Oil may go lower, and it may bring the market down with it. However, oil is not going to continue lower for much longer. We are not even talking about the price of oil recovering, we are just talking about the price of oil bottoming. If oil trades down to $20 a barrel but then finally steadies there and does not move lower, our markets should have time to take a breather and potentially steady themselves as well. If the Federal Reserve does not understand that this correction is temporary and necessary, it would be absolutely frightening for all investors in the U.S. markets.