FRANKFURT (Reuters) – A top U.S. Federal Reserve official urged the European Central Bank on Tuesday to consider employing a U.S.-style quantitative easing programme to counter slowing inflation and recession in the euro zone.
The ECB has engaged in bond purchases in the past but has always withdrawn an equivalent amount of money from markets to ensure its interventions are neutral for the money supply, fearful of stoking inflationary pressures. Continue reading
“This is not a fluke: almost all of the underlying determinants of inflation point to weakness,” writes BofA Merrill Lynch economist Ethan Harris in a note to clients today.
For all of the talk of rising government bond yields and predictions for when the Federal Reserve will taper back its bond buying, Harris says, deflation is still a bigger risk than higher inflation – and disinflation could cause the Fed to actually ramp up QE if it continues. Continue reading
Until recovery or destruction of the Dollar. As surely as the sky is blue, the latter will happen. QE3 is the nail in the coffin. When was the last time you borrowed your way out of debt?
If you really want to know what is going on in the economy, ignore what the Fed says and watch what it is does.
So what is the Fed doing? Bernanke’s announcement says the Fed will now spend a whopping $40 billion per month—$480 billion per year—purchasing mortgage-backed securities from the big Wall Street banks.
He says this is an effort to push down mortgage rates and get more people buying and building houses, and thus create jobs. If this is the best the Fed has to offer, America is in big trouble. Mortgage rates are already at historic lows, and people are not buying houses. Pushing record low rates a few fractions of a percent lower won’t do much. What is more likely to happen is that the big banks will finally have an opportunity to unload all their garbage subprime-mortgage-backed securities at the expense of taxpayers. This is probably the real unspoken motive.
But if that part of the Federal Reserve’s announcement wasn’t shocking enough, what it said next should blow your socks off. The Fed said it was writing itself a blank check for how much it could spend until the labor market improved “substantially.” It gave itself no predefined limit on how long, or on how much it could spend under this new QE3 program. It is completely open ended. It can go on forever.
Printing money to buy things is “Zimbabwe policy.” We all know what happened to Zimbabwe when it tried this. Eventually it cost Zimbabweans billions of dollars to buy a banana. This is where the QE road leads.
It is happening already. Within just a few hours of Bernanke’s statement, the dollar had lost over half a percent in value. On Friday it lost more than half a percent again.
In two days, the dollar lost more than a percent of its value. And that was due to just the announcement. The dollar printing has barely started.
The Federal Reserve’s QE policy will drive the dollar “through the floor,” says Peter Schiff, ceo of Euro Pacific Capital.
“This is a disastrous monetary policy; it’s kamikaze monetary policy,” Schiff told cbnc. “The dollar … is going to be in free fall at some point … ultimately there’s going to be a currency crisis.”
America needs to prepare for massive economic upheaval. America’s top banker has signaled that it is quantitative easing or sudden death for the economy. There is no choice. If the money printing stops, America stops. But that means the dollar is going to get killed. QE will destroy the dollar, and America’s standard of living.
Tough times are coming.
Full article: QE3: Dollar Killer (The Trumpet)
Ironically, in another article several days ago, it was mentioned (See “China Recasts Gold Bars” heading) that China was recasting larger gold bars into smaller ones. A possible motive for this being a new globally dominant currency that will end the USD’s rein. The validity of this remains to be seen, however, the world is one crisis away from a collapse. This is likely economic warfare
Not impressed by the headline? Consider the following: China has acquired more gold in the last six months than there is in all of Portugal, one of the EU’s largest holders of the precious metal.
Does that sound a bit more impressive?
“While the highly ‘sophisticated’ traders that make up the gold market continue to buy or sell the precious metal based on whether the Fed will or will not do the NEW QE [Quantitative Easing] tomorrow … China continues to do one thing. Buy,” writers at Zero Hedge report.
And they’re not kidding. China is on a mission:
“[I]nstead of purchasing US paper, Beijing continues to buy non-US gold, in the form of 68 tons in imports from Hong Kong in the month of June. The year to date total (6 months)? 383 tons,” the Hedge reports.
“In other words, in half a year China, whose official total tally is still a massively underrepresented 1054 tons, has imported more gold than the official gold reserves of Portugal, Venezuela, Saudi Arabia, the UK, and so on, and whose YTD [Year to Date] imports alone make it the 14th largest holder of gold in the world,” the report adds.
“[T]he moment the PBOC [People’s Bank of China] does announce its official updated gold stash, a gold price in the mid-$1000 range will be a long gone memory,” Hedge adds ominously.
Let’s do a quick recap, shall we?
1. Has China been selling off its stake in U.S. Treasurys? Yes.
2. Has China been importing hundreds of tons of gold? Yes.
If China’s actions are any indication of what lies ahead, is it safe to assume things are going to get really interesting, really fast?
Full article: Hoarders: China Has Imported 383 Tons of Gold in the Last 6 Months (The Blaze)
While the Federal Reserve under Ben Bernanke is holding off on additional quantitative easing measures, across the Pacific the Bank of Japan has initiated a new round of asset buying.
According to the Financial Times , the Bank of Japan has announced that more quantitative easing is being implemented in the island nation due to “slowing growth and persistent deflationary forces in the world’s largest economy.”
In the new round, the Bank of Japan will buy $61 billion of assets to inject greater liquidity into the economy as the “lost decade” lingers years longer than its name implies. In addition to the asset buying, the Bank of Japan is maintaining interest rates between zero and 0.1% .
With the recent move by China to relax controls on the yuan, currency devaluations continue to be implemented as a Keynesian response to recession by governments and central banks around the world.
Full article: Bank of Japan opens fire in currency wars (NASDAQ)
What is the difference between printing money and counterfeiting? There is none.
Counterfeiting is illegal because it is the false creation of value. The counterfeiter takes low-value paper and turns it into high-value money, which is fundamentally a claim on the real productive value of the economy that issues the currency and recognizes it as a proxy means of exchanging that productive value.
Counterfeiting is illegal because the counterfeiter creates no additional value–he creates only the proxy for value. Creating real value–adding meaningful goods or services to the economy–is tedious, hard work. How much easier to simply transform near-worthless paper into a claim on actual goods and services.
If this is illegal, then would somebody please arrest the Board of the Federal Reserve for counterfeiting? The Fed has blatantly printed money without creating any real value to back up their added claims on productive value. Hence they are counterfeiting, pure and simple. A government based on rule of law would arrest these fraudsters and cons at the earliest possible convenience.
And while you’re drawing up the indictment, can you also charge them with counterfeiting competence and policy, as they have demonstrated the Peter Principle par excellence: the Board has risen to its highest level of incompetence. Their counterfeit policies have wreaked incomparable damage on the real productive economy.
The essence of counterfeit policy–a fake policy that claims to be something it is not–is “extend and pretend.” And the sole goal of “extend and pretend” is self-preservation and the preservation of the Financial Elite which has tightened its grip on the nation’s throat as a direct consequence of Federal Reserve policies–notably “extend and pretend.”
Full article: Counterfeit Money, Counterfeit Policy (Financial Sense)