This is it — the hot news that Wall Street was waiting for with bated breath.
$600 billion Fed funny money! Big LIE!
This is it — the hot news that Wall Street was waiting for with bated breath.
Fed Chief Bernanke’s going to buy another $600 billion in Treasury securities to pump liquidity into the economy.
But it’s all one big, fat lie.
First, because the whole concept of “buying Treasuries” is a smokescreen. What Bernanke is really doing is running the money printing presses, and it’s no secret. Even the emperor himself knows he has no clothes.
Second, because Bernanke also knows — all too well — that he’s not truly pumping money INTO the U.S. economy. In reality, the U.S. economy is leaking like a sieve. So for all practical purposes, he’s pumping the money OUT OF the U.S. economy — to countries overseas.
Third and most important, the “big number” — $600 billion — is meaningless. The Fed says quite bluntly that they will …
In other words, they’ll blow right past the $600 billion mark whenever and however they darn please.
State of Shock and Awe
Meanwhile, yesterday’s elections have left one political party in a state of shock and the other basking in the warm glow of success. And our readers are not the least bit surprised!
Thanks to our special polls — both among our own readers and nationally — we were able to tell you, well ahead of time, that fiscal conservatives would sweep into Washington, and that the entire government would end the day deeply divided.
In the House of Representatives, Republicans rule. In the Senate, the Democratic party held on by the skin of its teeth, but without a true, operational majority.
That means Congress is now officially OUT of the stimulus and bailout business. It also means that many in Congress will be fighting to actually reduce government spending at every opportunity.
Most importantly, it means all the gas that was fueling the meager recovery of the past two years is no more. President Obama couldn’t push a new spending bill through the new House or Senate even if his life depended on it!
And that leaves the White House
with a serious problem …
Obama & Team know that the 2012 presidential campaign effectively starts TODAY … that voters will hold the president personally responsible for turning the economy around … and that ANY FAILURE TO SLASH UNEMPLOYMENT WILL DOOM THEIR CHANCES in the next election!
But new spending bills are no longer a possibility. So that leaves the president with one and ONLY one weapon of last resort: The Federal Reserve.
That’s why today’s Fed announcement — that it will print only $600 billion to buy Treasuries and other securities — is just a down payment. Merely a small tip compared to the truly big money-printing binge yet to come.
Look: In the world we just left behind, Congress and the Treasury Department led the charge on stimulus:
- Congress passed spending bills.
- The Treasury borrowed the money to pay for them.
- The Fed’s role was merely to buy Treasuries with newly-printed money in order to keep interest rates low.
Now, in the new world that has just dawned, the game has changed. Radically! Congress and the Treasury are on the sidelines. The responsibility for stimulating the economy now falls on the Fed ALONE.
That’s why you need to take today’s Fed announcement with a grain of salt. Yes, the Fed is firing up the printing presses again. Yes, it will use that money to buy treasuries and other securities. But …
$1.7 trillion in new paper money,
and it still wasn’t enough.
My point: Anyone who really believes that the Fed will only print a mere $600 billion this time is missing the point. It will take many times that amount to buy Obama a second term! The bottom line …
Every dollar you earn and own
is about to be gutted of its value.
Even just the dollars the Fed has printed so far are ALREADY driving the price of essential everyday items through the roof.
Just since last July, margarine prices have risen 6 percent. Women’s dresses are up 6 percent. Beer is up 6 percent. Milk prices have risen 6.5 percent. Candy is 13 percent more expensive. Butter is up 19 percent. Shoes are up a whopping 45 percent. All in just over four months!
Now, with the Fed set to flood the world with unbacked paper dollars, it’s time to get ready for even greater destruction of your buying power … an all-out assault on your standard of living … a brutal frontal attack on your financial security.
Plus, this sea change in the management of the U.S. economy will have an enormous impact on every investment market. It will impact stocks … bonds … foreign currencies … precious metals … oil and other commodities, especially food.
And by doing so, it will create some of the greatest profit opportunities any of us has ever seen.
Our next new presentation to help
you profit is just days away!
As you read this, we’re working nonstop on a brand-new presentation entitled “The $3 Trillion Lie.”
In it, we show you precisely HOW this destruction of the dollar will affect the investment markets. And we also show you how much you could earn by making the right moves now.
We’ll send you a special email inviting you to view this crucial strategy update within the next few days. So be sure to watch your inbox!
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
QE2 risks Currency Wars & Dollar Hegemony End
The Federal Reserve is expected to announce a new round of bond-buying today to lower long-term interest rates to boost the economy.
Debate is raging inside and outside the Fed about how much good it will do, if any. Proponents say purchasing hundreds of billions of dollars more in Treasury bonds will provide only modest support for the economy. Foes warn that it could backfire by pushing up commodity prices, sowing seeds of unwelcome inflation in the future, or by undermining confidence in the Fed’s ability to manage — and eventually reduce — its holdings.
Ahead of the Fed’s 2:15 p.m. announcement, here’s a rundown of the key issues:
The Fed’s “QE2” risks accelerating the demise of the dollar-based currency system, perhaps leading to an unstable tripod with the euro and yuan, or a hybrid gold standard, or a multi-metal “bancor” along lines proposed by John Maynard Keynes in the 1940s.
China’s commerce ministry fired an irate broadside against Washington on Monday. “The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a ‘currency war’. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate,” it said.
David Bloom, currency chief at HSBC, said the root problem is lack of underlying demand in the global economy, leaving Western economies trapped near stalling speed. “There are no policy levers left. Countries are having to tighten fiscal policy, and interest rates are already near zero. The last resort is a weaker currency, so everybody is trying to do it,” he said.
Pious words from G20 summit of finance ministers last month calling for the world to “refrain” from pursuing trade advantage through devaluation seem most honoured in the breach.
Taiwan intervened on Monday to cap the rise of its currency, while Korea’s central bank chief said his country is eyeing capital controls as part of its “toolkit” to stem the flood of Fed-created money leaking out of the US and sloshing into Asia. Brazil has just imposed a 2pc tax on inflows into both bonds and equities – understandably, since the real has risen by 35pc against the dollar this year and the country has a current account deficit.
“It is becoming harder to mop up the liquidity flowing into these countries,” said Neil Mellor, of the Bank of New York Mellon. “We fully expect more central banks to impose capital controls over the next couple of months. That is the world we live in,” he said. Globalisation is unravelling before our eyes.
Each case is different. For the 40-odd countries pegged to the dollar or closely linked by a “dirty float”, the Fed’s lax policy is causing havoc. They are importing a monetary policy that is far too loose for the needs of fast-growing economies. What was intended to be an anchor of stability has become a danger.
Hong Kong’s dollar peg, dating back to the 1960s, makes it almost impossible to check a wild credit boom. House prices have risen 50pc since January 2009, despite draconian curbs on mortgages. Barclays Capital said Hong Kong may switch to a yuan peg within two years.
Mr Bloom said these countries are under mounting pressure to break free from the dollar. “They are all asking themselves whether these pegs are a relic of the past,” he said.
China faces a variant of the problem with its mixed currency basket, a sort of “crawling peg”. Commerce minister Chen Deming said last week that US dollar issuance is “out of control”. It is causing a surge of imported inflation in China.
Critics in the US Congress say China could solve that particular problem very quickly by letting the yuan rise enough to bring the country’s $180bn trade surplus into balance.
They say the strategy of holding down the yuan to underpin China’s export-led model is the real source of galloping wage and price inflation on China’s eastern seaboard. The central bank has accumulated $2.5 trillion of foreign bonds but lacks the sophisticated instruments to “sterilise” these purchases and stem inflationary “blow-back”.
But whatever the rights and wrongs of the argument, the reality is that a chorus of Chinese officials and advisers is demanding that China switch reserves into gold or forms of oil. As this anti-dollar revolt gathers momentum worldwide, the US risks losing its “exorbitant privilege” of currency hegemony – to use the term of Charles de Gaulle.
The innocent bystanders caught in the crossfire of Fed policy are poor countries such as India, where primary goods make up 60pc of the price index and food inflation is now running at 14pc. It is hard to gauge the impact of a falling dollar on commodities, but the pattern in mid-2008 was that it led to oil, metal, and grain price rises with multiple leverage. The core victims were the poorest food-importing countries in Africa and South Asia. Tell them that QE2 brings good news.
So the question that Ben Bernanke and his colleagues should ask themselves is whether they have thought through the global ramifications of their actions, and how the strategic consequences might rebound against America itself.