Desperate Fed has Lost All Economic Integrity
The Fed has Lost All Economic Integrity
Back when the Federal Reserve introduced Quantitative Easing (QE), Ben Bernanke insisted it was a short term emergency measure. That it should not be confused with monetizing debt, or debasing currency, as the Fed planned to unwind its position of purchased assets and normalize rates once the economy had recovered. It was temporary.
It has been stated here among other places that the Federal Reserve's stated intentions were not realistic. That you can not recover from a debt crisis by inflating a bigger debt bubble and you can not unwind a debt bubble.. That the current financial markets are being held up by cheap money and not by a strong economy. If you take away the cheap money and the market will collapse.
Since 2016 the Federal Reserve raised rated to the lofty heights of 2.25 to 2.50%. As of December the Fed indicated it planned to raise rates two or three more times in 2019. The Fed was going to prove they could unwind the greatest debt bubble ever and it was going to be as boring as watching paint dry. They said we would never see another financial crisis in our life time. It was on auto-pilot.
It is amazing how much things have changed since then. The auto-pilot has been replaced by the nervous FOMC and what they suggest was to be a boring non-event, became something else. The economy fueled by a giant debt bubble began to show weakness. It seems "The world's greatest economy" can not support interest rates above 2.25%.
The Federal Reserve has now completely reversed course on its stated plan to normalize rates and unwind its QE program. In a matter of a few months the Fed went from planning to raise rates two to three times in 2019, to now pulling the emergency switch again.
Where Ben Bernanke stated that QE was a one time emergency measure, has now been proven to be a lie. This past week the US Federal Reserve has admitted that they can not wind down their QE program and now 3.8 TRILLION DOLLARS has been permanently monetized. The Fed has painted themselves into a dark corner and has no way out.
Only weeks before Jerome Powell came out and said that QE and negative rates should not be seen as an unusual event moving forward. This is Fed speak for they plan to further monetize debt in the face of the coming economic correction. The Federal Reserve is now in the business of monetizing debt and debasing currency, in case you have not figured it out yet.
You see when the Fed took the position that loading the economy up with massive levels of new debt, through its monetary manipulation, much of which is at or near junk non-sustainable debt and having no hope of ever being paid back, the Fed locked themselves into a dire situation. They now admit they can not raise rates without popping the massive debt bubble they have created. The US economy can not support rates above 2.5%, which is why the Fed was forced to cut. This is only the beginning of the Fed reversal.
While the Federal Reserve has clung to failed economic models, they are getting further and further out of touch with economic reality,. They are not the only central bank to partake in Keynesian fantasy that you can print your way to prosperity. The Bank of Japan has gone to astronomical levels in an effort to centrally plan their economy via failed Keynesian policy. The ECB has now reintroduced new rounds of QE in a desperate attempt to revive their failed economy.
Interestingly the Federal Reserve is aiming to follow similar failed efforts at home. Massive money printing, buying huge amounts of assets and driving interest rates towards zero and then negative, all in the name of rescuing the massive debt bubble known as the US economy, is just an example of how hopeless the situation has become. This is third world economics 101 and yet these so called tall foreheads seem to be absolutely clueless to the negative impact of debasing their currency, while monetizing debt.
Fiat System Spiraling Out of Control
Jerome Powell is openly talking about how these types of "monetary tools" are just going to become normal part of monetary policy moving forward. What??? Yes, he openly stated that QE (ie: debasing the currency and monetizing debt) will become normal.
The Bank of Japan, the European Central Bank and the Federal Reserve are all singing from the same failed play book. It is a Keynesian policy love fest, where the very top of the food chain profits from free money and monetization of debt, while the average Joe can expect to see his/her cost of living keep spiraling higher, while real wages remain unchanged.
Oh sure the Federal Reserve is suppose to take steps to hold prices stable and this was in fact a goal they held right up until the US "temporarily suspended the gold reserve" in 1971. Since then inflation has been a predominate part of the US economy. In order to mitigate the appearance of inflation, the Federal Reserve has gone to great lengths to alter the way they measure inflation since 1971 which resulted in much lower inflation numbers than would have otherwise shown, by using the method which cast a huge shadow over the Fed and its actions in the 1970's. If one were to use a true measure we would easily see an inflation rate is well above 5%, which completely conflicts with the stated mandate of the Federal Reserve to maintain price stability. The fact that the Fed views 2% inflation as stable, is a problem in itself. These people search high and low for ways to normalize the debasement of the dollar and monetizing debt through inflation, while suggesting they are defending its purchasing power.
The Federal Reserve has inflated the monetary supply by trillions of dollars after the last debt bubble. Of course when money is added to the economy it is going somewhere and driving up the demand in the system. In this case it impacted the price of financial assets and pushing interest rates to the floor. The result has been primarily driving a massive debt bubble, as trillions of dollars of new debt has pushed bond and equity markets far our of price equilibrium. Massive levels of new corporate, consumer and government debt has flooded the economy. Much of this debt is completely unsustainable.
Markets are balancing on a razors edge, as they can not support the real cost to borrow money. If you don't believe me, then think for a second where the markets would be if interest rates were allowed to normalize to a very modest rate of 4.5%. We would find out in a hurry that the Fed induced market bubble is just that. Nothing supporting it but monetary manipulation.
The term of "price stability" has been played with and altered by the Fed over its lifetime, many times. The word "stable" means unchanged, or not altered by movement. Over time the Fed has altered their interpretation of "stable" to mean up to a maximum of 2% inflation, which in fact is not stable at all. As time went on their interpretation changed again from a maximum of 2% inflation to a target of 2% inflation. This over course further defies the actual intended meaning of price stability. Recently Powell has suggested that the Fed is looking for symmetric 2% inflation, which is to say the Fed will be looking for even higher inflation to offset periods where the inflation rate did not meet its 2% goal. This is a very dangerous trend which is geared towards one outcome.
This focus of central banks on increasing inflation targets is in reality a tool to debase the fiat currency system. It is a Ponzy scheme. They will look for reasons to expand the money supply by printing up more and more money, all in a effort to "save the economy", as they suggested in 1971 when they took the dollar off the Gold Standard and all along the way forward as the US dollar kept losing more and more purchasing power.
The reality of monetary debasement of the major economies is becoming blatantly obvious to more and more people. The trust in fiat currency is declining at a record pace for very good reason. Precious metals, such as Gold and Silver are rapidly becoming a cornerstone for many looking to hedge against central banks that have no interest in maintaining the values of their fiat currencies. It is impossible to have faith in central banking institutions that do not even pretend to have any interest in maintaining any economic integrity.
As central banks move further and further away from their mandate of price stability and more and more into organizations fixated on ignoring market economics through actions of centrally planned market manipulation, the weaker the fiat money system becomes. History will look back upon this period as the reason we can not allow central banks to have the unfettered power to be increase the money supply. The Gold Standard kept the Federal Reserve on a leach. Today, we are witnessing a world of limitless money printing. Responsibility be damned, they want to inflate a bubble. Economic fundamentals be damned, they want to pretend all can be fixed with cheap money.
They plan to print, print, print, print, print, print and print some more. Further rounds of QE are certainly on the way. The ECB have just started a new round of QE. How long will it take Fed to following suit? Further monetizing debt is going to become the norm, that is if you believe what the Federal Reserve is saying. This is the future, which is leading the masses to look for alternatives to store value.
HOME
Back when the Federal Reserve introduced Quantitative Easing (QE), Ben Bernanke insisted it was a short term emergency measure. That it should not be confused with monetizing debt, or debasing currency, as the Fed planned to unwind its position of purchased assets and normalize rates once the economy had recovered. It was temporary.
It has been stated here among other places that the Federal Reserve's stated intentions were not realistic. That you can not recover from a debt crisis by inflating a bigger debt bubble and you can not unwind a debt bubble.. That the current financial markets are being held up by cheap money and not by a strong economy. If you take away the cheap money and the market will collapse.
Since 2016 the Federal Reserve raised rated to the lofty heights of 2.25 to 2.50%. As of December the Fed indicated it planned to raise rates two or three more times in 2019. The Fed was going to prove they could unwind the greatest debt bubble ever and it was going to be as boring as watching paint dry. They said we would never see another financial crisis in our life time. It was on auto-pilot.
It is amazing how much things have changed since then. The auto-pilot has been replaced by the nervous FOMC and what they suggest was to be a boring non-event, became something else. The economy fueled by a giant debt bubble began to show weakness. It seems "The world's greatest economy" can not support interest rates above 2.25%.
The Federal Reserve has now completely reversed course on its stated plan to normalize rates and unwind its QE program. In a matter of a few months the Fed went from planning to raise rates two to three times in 2019, to now pulling the emergency switch again.
Where Ben Bernanke stated that QE was a one time emergency measure, has now been proven to be a lie. This past week the US Federal Reserve has admitted that they can not wind down their QE program and now 3.8 TRILLION DOLLARS has been permanently monetized. The Fed has painted themselves into a dark corner and has no way out.
Only weeks before Jerome Powell came out and said that QE and negative rates should not be seen as an unusual event moving forward. This is Fed speak for they plan to further monetize debt in the face of the coming economic correction. The Federal Reserve is now in the business of monetizing debt and debasing currency, in case you have not figured it out yet.
You see when the Fed took the position that loading the economy up with massive levels of new debt, through its monetary manipulation, much of which is at or near junk non-sustainable debt and having no hope of ever being paid back, the Fed locked themselves into a dire situation. They now admit they can not raise rates without popping the massive debt bubble they have created. The US economy can not support rates above 2.5%, which is why the Fed was forced to cut. This is only the beginning of the Fed reversal.
While the Federal Reserve has clung to failed economic models, they are getting further and further out of touch with economic reality,. They are not the only central bank to partake in Keynesian fantasy that you can print your way to prosperity. The Bank of Japan has gone to astronomical levels in an effort to centrally plan their economy via failed Keynesian policy. The ECB has now reintroduced new rounds of QE in a desperate attempt to revive their failed economy.
Interestingly the Federal Reserve is aiming to follow similar failed efforts at home. Massive money printing, buying huge amounts of assets and driving interest rates towards zero and then negative, all in the name of rescuing the massive debt bubble known as the US economy, is just an example of how hopeless the situation has become. This is third world economics 101 and yet these so called tall foreheads seem to be absolutely clueless to the negative impact of debasing their currency, while monetizing debt.
Fiat System Spiraling Out of Control
Jerome Powell is openly talking about how these types of "monetary tools" are just going to become normal part of monetary policy moving forward. What??? Yes, he openly stated that QE (ie: debasing the currency and monetizing debt) will become normal.
The Bank of Japan, the European Central Bank and the Federal Reserve are all singing from the same failed play book. It is a Keynesian policy love fest, where the very top of the food chain profits from free money and monetization of debt, while the average Joe can expect to see his/her cost of living keep spiraling higher, while real wages remain unchanged.
Oh sure the Federal Reserve is suppose to take steps to hold prices stable and this was in fact a goal they held right up until the US "temporarily suspended the gold reserve" in 1971. Since then inflation has been a predominate part of the US economy. In order to mitigate the appearance of inflation, the Federal Reserve has gone to great lengths to alter the way they measure inflation since 1971 which resulted in much lower inflation numbers than would have otherwise shown, by using the method which cast a huge shadow over the Fed and its actions in the 1970's. If one were to use a true measure we would easily see an inflation rate is well above 5%, which completely conflicts with the stated mandate of the Federal Reserve to maintain price stability. The fact that the Fed views 2% inflation as stable, is a problem in itself. These people search high and low for ways to normalize the debasement of the dollar and monetizing debt through inflation, while suggesting they are defending its purchasing power.
The Federal Reserve has inflated the monetary supply by trillions of dollars after the last debt bubble. Of course when money is added to the economy it is going somewhere and driving up the demand in the system. In this case it impacted the price of financial assets and pushing interest rates to the floor. The result has been primarily driving a massive debt bubble, as trillions of dollars of new debt has pushed bond and equity markets far our of price equilibrium. Massive levels of new corporate, consumer and government debt has flooded the economy. Much of this debt is completely unsustainable.
Markets are balancing on a razors edge, as they can not support the real cost to borrow money. If you don't believe me, then think for a second where the markets would be if interest rates were allowed to normalize to a very modest rate of 4.5%. We would find out in a hurry that the Fed induced market bubble is just that. Nothing supporting it but monetary manipulation.
The term of "price stability" has been played with and altered by the Fed over its lifetime, many times. The word "stable" means unchanged, or not altered by movement. Over time the Fed has altered their interpretation of "stable" to mean up to a maximum of 2% inflation, which in fact is not stable at all. As time went on their interpretation changed again from a maximum of 2% inflation to a target of 2% inflation. This over course further defies the actual intended meaning of price stability. Recently Powell has suggested that the Fed is looking for symmetric 2% inflation, which is to say the Fed will be looking for even higher inflation to offset periods where the inflation rate did not meet its 2% goal. This is a very dangerous trend which is geared towards one outcome.
This focus of central banks on increasing inflation targets is in reality a tool to debase the fiat currency system. It is a Ponzy scheme. They will look for reasons to expand the money supply by printing up more and more money, all in a effort to "save the economy", as they suggested in 1971 when they took the dollar off the Gold Standard and all along the way forward as the US dollar kept losing more and more purchasing power.
The reality of monetary debasement of the major economies is becoming blatantly obvious to more and more people. The trust in fiat currency is declining at a record pace for very good reason. Precious metals, such as Gold and Silver are rapidly becoming a cornerstone for many looking to hedge against central banks that have no interest in maintaining the values of their fiat currencies. It is impossible to have faith in central banking institutions that do not even pretend to have any interest in maintaining any economic integrity.
As central banks move further and further away from their mandate of price stability and more and more into organizations fixated on ignoring market economics through actions of centrally planned market manipulation, the weaker the fiat money system becomes. History will look back upon this period as the reason we can not allow central banks to have the unfettered power to be increase the money supply. The Gold Standard kept the Federal Reserve on a leach. Today, we are witnessing a world of limitless money printing. Responsibility be damned, they want to inflate a bubble. Economic fundamentals be damned, they want to pretend all can be fixed with cheap money.
They plan to print, print, print, print, print, print and print some more. Further rounds of QE are certainly on the way. The ECB have just started a new round of QE. How long will it take Fed to following suit? Further monetizing debt is going to become the norm, that is if you believe what the Federal Reserve is saying. This is the future, which is leading the masses to look for alternatives to store value.
HOME
