Phoenix Capital Research's blog

Yes, you read that correctly. High ranking members of the US Federal Reserve believe that because a one time purchase of an iPad is cheaper, the increase in the daily cost of food and energy is balanced out.

Let me be clear: if US Treasuries collapse, then the US has lost credibility in the global markets and we’re going to face a currency Crisis. I am not saying that this will happen right now. Europe could always implode first, buying the US some time. But at some point the US debt situation will lead to a Crisis. And the Fed is pushing us ever closer to this with QE 3.

So who will be buying Spanish bonds? Apparently no one but the ECB. And the ECB will only do this if Spain agrees to austerity measures… which Spain doesn’t want. Talk about a mess.

Indeed, it is now clear, via QE 3, that the Fed has gone “all in” in its commitment to money printing. QE 2 put food prices to record highs… what do you think QE 3 (which is unlimited) will do to the cost of living?

That high school students, even those who are borderline-failing their SATs, have a better understand of economics and job growth than Washington bureaucrats.

Spain’s ten-year bond yield has broken back above 6%. To see Spain’s sovereign bond yields rising like this after the ECB announced it would essentially provide “unlimited” buying as support is simply stunning. And it indicates in plain terms that the ECB’s program was in fact a dud.

So… the Fed has engaged in record intervention in the market and economy. Despite this, the US “recovery” has in fact been a total dud: we’re officially back in a recession. And inflation is hitting lift off. This means the US, like China and Europe, is no longer an engine for global growth. Combined these three regions account for 55% of global GDP.

Meanwhile, pretty much all of Europe is in recession now, including Germany. True, the ESM bailout fund has been ratified… but the question remains who actually has funds to support it (Spain and Italy are meant to supply 30% of its funding… and they’re the ones who will be requesting a bailout!).

Imagine if the world found out that China’s growth and recovery post 2008 were largely based on fraudulent data and garbage development projects fueled by easy money and rampant corruption on the part of Chinese officials?

In simple terms this tells us that inflation is hitting “lift off” in the US at the very same time that we are entering a recession that could be on par with that of 2008. And with corn and soybean prices at or near record highs, we could be on the verge of a stagflationary disaster combined with a food crisis at the very same time.

So what will QE 3 bring? The short answer is: nothing pretty. Gas and food prices were already high before the Fed announced QE 3. They will be going much higher in the future (Oil is currently falling based on Saudi Arabia working with the US Government to suppress prices).

So, the Fed has failed to improve the economy… but it has unleashed inflation. This is called STAGFLATION folks. And the fact the Fed thinks the answer to it is printing more money tells us point blank: things are going to be getting a lot worse in the coming months.

Congratulations Mario Draghi and Ben Bernanke, you’ve unleashed "unlimited" and "open-ended" programs and the bond markets are still imploding.

These are the issues to consider going forward. Our view is that it is quite possible the Fed has played its hand too strongly and thereby damaged its future efforts to maintain market stability via intervention. Given that stocks were already decoupled from the underlying economic realities, this has made the market highly vulnerable to a sharp correction.

These are the issues to consider going forward. Our view is that it is quite possible the Fed has played its hand too strongly and thereby damaged its future efforts to maintain market stability via intervention. Given that stocks were already decoupled from the underlying economic realities, this has made the market highly vulnerable to a sharp correction.