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.