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The Fed's Hands Are Tied... Right as the Financial System Begins to Crack
The Fed would do well to look at Japan.
Japan’s Nikkei, after rallying over 70% since November, just collapsed 11% in less than two days. Looking at the chart, it’s pretty clear where this thing is heading: the same as the NASDAQ in 2000.
This is the problem with economic policy that focuses on pushing stocks higher: eventually the collapsing economy comes home to roost and stocks implode. We saw this in 2000 and 2008. We’re currently seeing it in Japan. And it’s only a matter of time before it his the US.
Indeed, Bernanke’s whole life work has been based on the belief that the Fed didn’t do enough during the Great Depression. So he’s opted to expand the Fed’s balance sheet to over $3 trillion and to monetize most of the US’s debt issuance via QE to battle the Financial Crisis.
Altogether, the Fed has monetized QE equal to 15% or so of the US’s GDP. Doing this has already put stocks back in a bubble and damaged the economy to no end. Marginal debt is back at record highs, housing has not bottomed, and Bernanke is still talking about a “recovery” FIVE years after the Crash. At this point based on the business cycle alone we should be in a roaring growth spurt.
QE doesn’t work. It never has. Look at Japan.
Japan has monetized an amount equal to well over 25% of its GDP via QE. And at that point its bond market began to crash. It’s not coincidence that the Fed is beginning to talk about tapering QE now that this is happening. Even a career academic can look at what’s going on in Japan and know that more QE won’t help the US.
So the Fed is essentially handcuffed at this point. Increasing QE in any way risks a Japan-bond market style rout.
Can you imagine what would happen if the financial system faces another Crisis? The Fed has already thrown everything including the kitchen sink at the system. If the system collapses now the Fed will be powerless to stop it.
For some insights on how to prepare for a market collapse, visit us at:
http://gainspainscapital.com/protect-your-portfolio
Best Regards,
Graham Summers
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I read lots about the Bernank and his "mistaken policy" and that "he doesn't know what he is doing". I'd like to profer that the Bernank knows precisely what he is doing.
The Fed will own every mortgage is the US - intentional
The dollar will be destroyed -intentional
Equity markets will crash, big time - intentional
Bonds will crash - intentional
Pensions wiped out - intentional
States, Counties, Municipalities, Towns all bankrupt - intentional
Roll out martial law.
This is the Bernank plan for a world single currency, a New World Order.
"Indeed, Bernanke’s whole life work has been based on the belief that the Fed didn’t do enough during the Great Depression."
Nope thats just the cover story. His whole lifes work has been financing his tribes agenda with their victims money. When he's done, that other tribal member, Janet, will take over. But MSM will big up she being a woman, not a tribal member, thats both distracting and not antisemenetic. The clown show will go on until victims in real pain have had enough, then it might become blowback time.
Start stockpiling shit if you can. Can't afford gold no problem. Gona be plenty of alcoholics that would give you who knows what for a fith of jack.
QE delays the inevitable and makes it worse after it fails.
But in the short term, a rising market helped re-elect the Obama.
What better way to make the public forget about the criminal activities of the 0bummer regime than to engineer a financial crisis?
Hell, you might even be able to institute martial law when the "takers" go ape-shit in the cities.
A rising libertarian movement helped reelect O'bama.
And at what cost? Defeating O'romney? With no WH record, he would have operated carte blanche, where as o'bama is up to his ass in alligators already in his first year. O'romney would have had a pass for 3.
There actually was no real choice in the election cycle and the politically least effective individual was put in place. God help us.
Hardly. An entitlement big govewrnment teat sucking electorate relected BO. The reason that he got elected is his IRS assault on the Tea Party, limiting the political formation of an offset to "ACORN was not allowed. I think RINOS like McCain and Lindsey Graham KNEW the IRS probes were going on and gave tacet approval for them because the rank and file GOP members were and are not happy with the Tea Party. Look at what McCain and Graham are bitching about again now the IRS crap has came out.....Tea Party peopl requireing a balanced budget.
But Liberatarian for Obama? Not Even, the liberitarians ARE the Tea Party to soem extent. The GOP and DNC are the terrorists and the criminals. Vot for ANYBODY else.
I blame McCain et al for doing everything in their power to convince Ron Paul republicans to sit this one out.
Graham, just another piece of you with lots of outlandish predictions and empty claims and little substance. The Fed could double QE without risking a JGB 2.0 desaster. The proof will arrive in due time as the FED will be forced to expand QE. Second, the Nikkei had it's 'Nasdaq' moment long ago - in fact it's the Nasdaq that got Nikkei'd in 2001/2002. Japanese equities are not nearly as overvalued as the NQ 12 years ago.
John Paul ernanke's response: "I have not begun to print."
The fed has not blown everything yet. There is still the result that Bernanke ultimately wants, which is OVERT HYPERINFLATION. He'll keep trying, and any fear in government that he won't keep printing will simply make certain what is already likely. Paul Krugman replaces Bernanke.
interest rates are creeping up. Even the students are wailing and gnashing their teeth over loan rates going BACK TO NORMAL, which are ridiculously low now anyways.
It should be a very interesting summer. Got popcorn?
It is not about QE actually working or not in Japan or anywhere else. It is actually about wrecking an economy so badly that the victims beg for the NWO solutions to be offered them.
Japan as a hybrid eastern/western nation, was the trial balloon for the western implosion. I am paying close attention to the interactions of nations surrounding the disputed territorial waters there. I do not see Japan aggressively inflating at this moment as happenstance.
sorry the fed, at least in its current form aint reaching January! the party is over long before then.
August
'For some insights on how to prepare for a market collapse'
I just grin when I ask co-workers this question and they respond by shruggin their shoulders and saying, 'I don't know' and then pay no attention when a little free info is offered. It's then that I wish to say they should just bend over and kiss their arse goodbye, but working with primarily women, I'd probably be fired. The number of gloom and doom contributors these days is overwhelming ---- the time for tshtf is about due?
Not really an unprecedented pace of gloom and doom this week at ZH. I've suggested that they display an economic doomsday clock widget on their page, kind of like the Union of Concerned Scientists did during the cold war. At this point I know the hands of the clock are advncing every day, and I use ZH to inform my sense of the amount of time that we have left. There is nothing that happened this week that has accelerated my SHTF preparations, but I suspect that will change in August as the consequences of Fed policy decisions will be analyzed and discussed here.
It's like the 100-year earthquake that is due in California. We know that every day brings it closer, but we still have no idea when those tectonic plates will break loose.
oooh! Like the nuclear war clock, how many minutes to midnight, but instead of a 12 put a Zero Hedge icon. Perrrrfect!
Paging Mr. 7,
Mr. W B 7
You are needed in ZH Clockworks.
Thank you.
Whatever! The fed do what they want when they want.
Hands are tied. And wait for Yellin to be appointed next Fed Chairman.
At the same time she's cleared by the Senate a bill allowing the FED to buy 100% of Treasuries will be passed by Congress. It's less than 9 months away.
and nobody stops until the jar is empty, even if the milk runs out.
their hands are tied in the cookie jar
Wait. Graham you told us that The Eurozone was going to collapse last Summer.