Posted on 11/04/2010 5:42:18 AM PDT by ChrisBoundsTX
Pumping money into the “disappointingly slow” economy hasn’t fixed the it yet, so why not try again – and this time go for a hail mary!
That is Federal Reserve Ben Bernanke’s game plan. The Fed is looking to inflate the economy even more by adding $75 billion a month to the it over the next eight months, totaling to a $600 billion pump. Of course, that does not include the $35 billion a month the Fed is expected to spend to replace retiring mortgage bonds.
Previously in my articles Like a Thief in the Night Part I and Part II I explained how the Federal Reserve works and how it uses quantitative easing to inflate the economy in hopes to spur it back to life. I also explained how every time they do that it devalues your wealth and potentially could lead to hyperinflation that destroyed like the Weimar Republic experienced. The Fed has made its decision to continue and play that dangerous game while most Americans go about their business ignorant of the fact that their wealth is being stolen right in front of their eyes.
From the Wall Street Journal:
The Federal Reserve, in a dramatic effort to rev up a “disappointingly slow” economic recovery, said it will buy $600 billion of U.S. government bonds over the next eight months to drive down interest rates and encourage more borrowing and growth.
Many outside the Fed, and some inside, see the move as a ‘Hail Mary’ pass by Fed Chairman Ben Bernanke. He embraced highly unconventional policies during the financial crisis to ward off a financial-system collapse. But a year and a half later, he confronts an economy hobbled by high unemployment, a gridlocked political system and the threat of a Japan-like period of deflation, or a debilitating fall in consumer prices.
The Fed left open the possibility of doing more if growth and inflation don’t perk up in the months ahead. The $75 billion a month in new purchases of Treasury debt come on top of $35 billion a month the Fed is expected to spend to replace mortgage bonds in its portfolio that are being retired…
There are immense unknowns and many risks.
In essence, the Fed now will print money to buy as much as $900 billion in U.S. government bonds through June—an amount roughly equal to the government’s total projected borrowing needs over that period.
In normal times, a Fed spending spree on government bonds would be highly inflationary, because it would flood the economy with money and raise worries about too much government spending. The mere worry of too much inflation in financial markets could drive long-term interest rates higher and cause the Fed’s program to backfire.
Prices in commodities markets have marched higher since late August. Crude-oil futures prices, for instance, have risen 15% since then, to $85 per barrel.
Michael Pence, a top Republican in the House of Representatives, said the Fed was taking an “incalculable risk.”
Serenity now. Insanity later.
What part of NO STIMULUS don’t they understand?
This fail like 99% of all ‘Hail Marys’.
That’s the great thing about the Fed. Congress can say “I didn’t vote on that!” Brilliant scheme huh?
At some point another bottle of saline solution in a bleeding patent is just adding saline to saline...
“Michael” Pence? First time I’ve seen that.
How does MY vote count on this issue? The Feds seem to be able to do anything they want WITHOUT the OK from congress. This means an “outside-of-our-control” entity can DECIDE to print OUR money devaluing it and we have NO say? How is this different from the N. Koreans printing counterfeit money ... same amount of USA voter oversight, same result, ... I know the difference, different printing press!
Do you realize that the quote in part one of “Like a thief in the night” was never penned by Thomas Jefferson? It’s completely made up.
I get the larger issues. The FED is giving us a royal ass-raping. It will all end badly.
Fraking Monopoly money....
Can I get one of those gold colored $500,000 bills?
I recall how Bush was ridiculed after 9/11 for suggesting that people should go out and shop.
Low interest rates may be counterproductive. People that are saving for education expenses have to save more, people who are saving for a downpayment for a house have to save more, people saving for retirement have to save more and retired people have lowered incomes. If interest rates were to start moving up people sitting on downpayments waiting for home prices to drop further might start buying homes which might stabilize home prices or even increase their value thereby making homeowners feel more wealthy.
Gold is flying high this AM..so is Silver and foreign stocks.
We can complain about what the Fed is doing, but you better insulate your investments from inflation by going foreign and commodities. And a few US companies with most of their sales and profits outside the US.
Interesting. I’ll look into that - thanks. It’s true nonetheless.
This is why gold us up $41 an ounce already this morning.
Low interest rates may be counterproductive.
Rising interest rates might force Congress and the president to make concerted efforts to cut spending.
Not yet. But what you can do is get one of those $1400 gold coins now and wait a short while until it is WORTH $500,000. Then, the only thing that WON'T be worth $500,000 will be $500,000.
Excerpt:
But Helicopter Ben Knows all this. And he is a self-proclaimed expert on the Great Depression of the 1930's. And yet he plows ahead with this plan to wreck our economy further. Bottom line -- the Fed doe not give a rip. The plan is to sucker millions who have been sitting on the sidelines awaiting the 'recovery.'* * * The answer is that an awful lot of people are going to lose an awful lot of money.
We heard the first rumbles of trouble from these freshly gathering storm clouds last week when unexpectedly strong UK third-quarter growth caused a minor correction to gilt prices. Yet this was fast forgotten. * * *
The purpose of QE is – by driving interest rates ever lower – to create a disincentive to save in the hope that companies and households might consume more or invest in higher risk assets. Paradoxically, the very reverse may be happening.
Funds are still flowing into government bonds in record quantities, for if you know central bankers are going to continue supporting the price, then there is every incentive to buy. Consumption and private sector investment is correspondingly harmed.
The phenomenon has also spawned a renewed "search for yield", which creates yet further anomalies. For instance, corporate bond prices have been a major beneficiary of the dash for government debt. * * *
The dangers * * * of further inflating a bond market already disengaged from underlying fundamentals are all too apparent.
Assuming no default, government bonds will never entirely destroy capital, in the same way as sometimes occurs with equity. But inflation can seriously impair it, and once markets suspect the inflation genie is out of the bottle, the damage is always swift and devastating.
Then the trap is set. Word to the wise: Don't get you tails slammed in Mr. B's mouse trap.
And yada, yada, yada.
ALICE IN WONDERLAND’S RABBIT HOLE HAS ENGULFED THE WORLD.
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