August 31, 2012
During his Jackson Hole speech on Thursday, Fed boss Ben Bernanke said the privately owned bankster cartel “will provide additional policy accommodation as needed” and may engage in more so-called quantitative easing.
“As the crisis crested, and with the federal funds rate at its effective lower bound, the FOMC [Federal Open Market Committee] turned to non-traditional policy approaches to support the recovery,” Bernanke said.
“The costs of non-traditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”
The Fed has thus far squandered more than $2 trillion in quantitative easing and despite this the economy has slipped further into depression.
“Quantitative easing is a resort to the money printing press,” explains Michael S. Rozeff. “It means seizure and coercion of goods and services from the inhabitants of a country. But it also means either a government that is spending beyond its means, or one whose economy is not strong enough to generate financing by the usual means, or both.”
Operation Twist – the wholesale purchase of long-term bonds swapped for short-term bonds in order to force down interest rates – frittered away an additional $267 billion. Following the Fed’s announcement, markets went into a frenzied tailspin and seasoned observers wondered when the ultimate crash would commence.
During the Jackson Hole speech, Bernanke hinted that the Fed is not finished blowing trillions of dollars in funny money to save an economy seriously taking on water due largely to the Fed’s boom and bust policies. He said “nontraditional policies” like quantitative easing “when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”
In short, it seems likely the Fed will begin a third round of buying Treasurys and mortgage-backed securities.
Bernanke also said unemployment will continue unless “the economy begins to grow more quickly than it has recently” and it will remain vexing for some time.
“If zero interest rates and quantitative easing could really solve unemployment, there would be no reason not to maintain such policies in perpetuity. Such policies, however, lead to the formation of asset bubbles,” Rep. Ron Paul warned during the last QE boondoggle. “The next bubble is already forming, although which sector will be hit hardest remains to be seen.”
Economists and investors, however, believe we have seen the last of monetary easing, at least for now.
“Only 44 percent of fund managers in the Reuters global asset allocation poll published Thursday now think the Fed will announce a third round of quantitative easing, down from 70 percent in the same poll last month,” the Economic Times reported on August 30.
“Similarly, a poll of economists last Friday gave a 45 percent chance of a new round of quantitative easing resulting from the Fed’s Sept. 12-13 policy meeting, a sharp cut from 60 percent in another poll earlier in the month.”
This article was posted: Friday, August 31, 2012 at 9:09 am