This page has been archived and commenting is disabled.
The Fed Lacks the Tools AND the Intelligence to Tighten
The
financial media is filled with commentators who are now speculating that the
Fed may begin tightening soon.
This entire
debate is moronic. The Fed’s done nothing but loosen monetary policy since the
Financial Crisis began. Since 2007, the Fed didn’t even bother to think of stepping on the brakes when it
came to monetary policy.
I’ve shown
the below list before, but it’s worth reviewing as the moves listed are simply
staggering to take in. These are the Fed’s moves since the Financial Crisis
began in 2007:
·
The Federal Reserve cutting interest rates from
5.25-0.25% (Sept ’07-today)
·
The Bear Stearns deal/ Fed taking on $30 billion
in junk mortgages (March ’08)
·
The Fed opens up various lending windows to
investment banks (March ’08)
·
The SEC proposes banning short-selling on
financial stocks (July ’08)
·
Hank Paulson gets a blank check for
Fannie/Freddie but promises not to use it (July ’08)
·
Hank Paulson uses the blank check with Fannie/
Freddie spending $400 billion in the process (Sept ’08).
·
The Fed takes over insurance company AIG (Sept
’08) for $85 billion.
·
The Fed doles out $25 billion for the auto
makers (Sept ’08)
·
The Feds kick off the $700 billion Troubled
Assets Relief Program (TARP) with the Government taking stakes in private banks
(Oct ’08)
·
The Fed offers to buy commercial paper (non-bank
debt) from non-financial firms (Oct ’08)
·
The Fed offers $540 billion to backstop money
market funds (Oct ’08)
·
The Feds agree to back up to $280 billion of
Citigroup’s liabilities (Oct ’08).
·
$40 billion more to AIG (Nov ’08)
·
Feds agree to back up $140 billion of Bank of
America’s liabilities (Jan ’09)
·
Obama’s $787 Billion Stimulus (Jan ’09)
·
QE lite (August ’10)
·
QE 2 (November ’10)
I’m sure I
left something out here. But the above list makes it clear the Fed does only
ONE thing: throw money away. The Fed has met literally EVERY problem in the
financial system (with the exception of mortgage fraud which is OK as far as
the Fed is concerned) by throwing money at it.
So… the ONLY
way the Fed could tighten would be if we no longer had any economic problems.
But we do. Here are just a few of them:
§ U-6
unemployment at 15.5% (April 2011)
§ New
home sales at a record low (Feb 2011)
§ Housing
double dip confirmed (April 2011)
§ 44+
million Americans on food stamps (April 2011)
And then of
course, there’s the $190+ TRILLION in derivatives sitting on US banks’ balance
sheets, the Treasury market where the Fed is now the largest holder of US debt
and buying over 50% of all new debt issued, and more.
To recap…
the Fed has done NOTHING but loosen monetary policy since the Financial Crisis
began… the problems that the Fed has been battling have not gone away… and the
Fed is somehow going to magically starting tightening?!?!
Discussions
of the Fed tightening should be up there with Elvis sightings: entertaining but
worthless. The only thing the Fed knows how to do is throw money away.
The mere
idea that Bernanke and Dudley and pals will suddenly become anything other than
Wall Street puppets is laughable. Everything they’ve done has been devoted to
helping certain Wall Street firms become more powerful.
Consider that JP Morgan took over Bear Stears. Bank of America
took over CountryWide Financial and Merrill Lynch. Citibank and Bank of America
were the only two banks to have their liabilities directly backed by the Fed
($280 billion for Citi and $180 billion for BofA).
Then there’s Goldman Sachs which was made whole from all AIG
liabilities, received $13 billion in direct funding from the Fed, and was
supported while ALL of its investment bank competitors either went under or
were consumed by other entities, granting Goldman a virtual monopoly over the
investment banking business (the firms that were merged with larger firms all
laid off large portions of their employees and closed down whole segments of their
businesses).
The Fed will continue this favoritism ad infinitum. And that will
include more QE and money printing to help its favored firms stay in power. So
QE 3 is coming as is QE 4 etc.
And it’s
ultimately going to kill the US Dollar.
On that
note, if you’ve yet to take steps to prepare your portfolio for the coming
inflationary disaster, our FREE Special Report, The Inflationary Disaster explains not only why inflation is here
now, why the Fed is powerless to stop it, and three investments that absolutely
EXPLODE as a result of this.
All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.
To pick up
your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
Good
Investing!
Graham
Summers.
PS. We also
offer a FREE Special Report specifying exactly how to prepare for the coming
collapse in the US stock market (inflation will NOT be positive for stocks for
much longer).
I call it The
Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a
wealth of information about portfolio protection, which investments to own and
how to take out Catastrophe Insurance on the stock market (this “insurance”
paid out triple digit gains in the Autumn of 2008).
Again, this
is all 100% FREE. To pick up your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
- advertisements -
They may not have the tools but more importantly they have not the desire to tighten. Larry Summers said the only way out of this recession is exports and a weak dollar. So we have to do it not matter have painful a little inflation is.
That's my understanding of the policy.
"From this state of things came grievous wrong and gross fraud".
Yeah, It came and then it went ballistic.
The boys at the fed have been put there to take the peoples money, and give it to their friends at the TBTF. That's it. That's all there is to it. Now just think like that, and you'll know what and when, they will do what they do. Get a spin on something, then use it to cover the transfer the wealth (from us to them).
STOP F U C K I N G POSTING YOUR SHIT ARTICLES PROMOTING YOUR SHIT NEWSLETTER!!!!!!!!!!!!!!!!!!!
Black social activist and university professor Cornel West calls out Obama as being a part of the oligarchy and challenges Americans to rise up like people in Europe and the Middle East are doing. Read here:
http://redpillfactory.blogspot.com/2011/05/cornel-west-calls-out-obama.html
.
SPAM
I'll just provide some quotes from Historian Andrew Dickson White, who wrote about the failure of fiat currency in France and how such things always ends in tears:
From "Fiat Money Inflation in France":
Everything was enormously inflated in price except the wages of labor. As manufacturers had closed, wages had fallen, until all that kept them up seemed to be the fact that so many laborers were drafted off into the army. From this state of things came grievous wrong and gross fraud.
New issues of paper were then clamored for as more drams are demanded by a drunkard. New issues only increased the evil; capitalists were all the more reluctant to embark their money on such a sea of doubt. Workmen of all sorts were more and more thrown out of employment. Issue after issue of currency came; but no relief resulted save a momentary stimulus, which aggravated the disease.
All men were waiting; stagnation became worse and worse. At last came the collapse and then a return, by a fearful shock, to a state of things which presented something like certainty of remuneration to capital and labor. Then, and not till then, came the beginning of a new era of prosperity.
The whole thing is available free online here: http://mises.org/books/inflationinfrance.pdf
Isn't it stunning how things never change? In order to fix these problems, the banks must be allowed to fail. It will cause a global depression yes, but eventually we will see real growth again. The alternative is never ending slavery. The market will find a way to fix the imbalances one way or another.
And of course, physical gold and silver will regain their rightful place as sound money. It's only fitting that Zimbabwe is talking about a gold backed currency.
I get it. You are short the USD. I'd encourage you to take a look at the rest of the world and choose your short against the USD very carefully. Hint - beware just about all other major currencies, and anything that is not at values rationalized by low levels of demand.
WTF?... there are plenty of tools at the Fed.
They just don't know how to use them since the adults all retired or left.
Didn't they fully backstop any losses from Fannie and Freddie in Dec. 08. (though they can't really do it.)
India has interest rates approaching 7%, but inflation is still a problem.
The fed could easily boost rates as long as they stay below a real interest rate re inflation, they won't scuttle the inflation, just slow it.
'08 was a political coup d'etat by Goldman-Sachs. I use the term "GS" loosely, to indicate a broader tribal networking of the entire power-structure. And, yes, to keep this gigantic, upside-down Ponzi going, they have to keep monetizing. So they will. Until the money goes to worthless and the System collapses. Then, they'll bait the FEMA camps with food....
So, some of the big companies in isolated areas are announcing fairly large hiring, to draw the rest of the small businesses to load up, expecting the economy to start up again. They are going to get wiped out in short order. There is 40% more housing than the population needs. The perps have 2,4,5,10, X houses that they cannot defend ….
Think of those bonds the central banks are carrying for each other like the paper silver promises. Build your algorithm accordingly.