Великий и могучий Fed
It's Time to Air Out Ben Bernanke's Dirty Laundy
Now that the Fed has engaged in QE 3 (which is essentially QE infinite since it's meant to run until things get where the Fed wants them), I decided to go back and count the recap the Fed/Feds' interventions since the Great Crisis began in 2007.
Here's a recap of some of the larger moves made during the Crisis: Cutting interest rates from 5.25-0.25% (Sept '07-today). The Bear Stearns deal/ taking on $30 billion in junk mortgages (Mar '08). Opening various lending windows to investment banks (Mar '08). Hank Paulson spends $400 billion on Fannie/ Freddie (Sept '08). The Fed takes over insurance company AIG for $85 billion (Sept '08). The Fed doles out $25 billion for the automakers (Sept '08) The Feds kick off the $700 billion TARP program (Oct '08) The Fed buys commercial paper from non-financial firms (Oct '08) The Fed offers $540 billion to backstop money market funds (Oct '08) The Fed agrees to back up to $280 billion of Citigroup's liabilities (Oct '08). $40 billion more to AIG (Nov '08) The Fed backstops $140 billion of Bank of America's liabilities (Jan '09) Obama's $787 Billion Stimulus (Jan '09) QE 1 buys $1.25 trillion in Treasuries and mortgage debt (March '09) QE lite buys $200-300 billion of Treasuries and mortgage debt (Aug '10) QE 2 buys $600 billion in Treasuries (Nov '10) Operation Twist 2 (Nov '11) QE 3 buys $40 billion in Mortgage Backed Securities every month from now on (Sept. '12)
That's one heck of a list. And the worst part is I know I've left something out somewhere.
And yet, despite all of this…
1) Median income today is lower than it was during at the end of 2009 (when the recession supposedly ended)
2) The percentage of Americans on food stamps has increased from 11% to nearly 15%
3) The average unemployment duration has increased from 30 weeks to nearly 40 weeks
4) The civilian employment to population ratio hasn't budged
My question to everyone, especially the political class: at what point do we start calling BS on the Fed's claims that it has a clue how to improve the economy?
Seriously, how many trillions of Dollars are we going to let the Fed spend? The Fed balance sheet is already at $2.8 trillion… making it larger than the GDP of France, the UK, or Brazil. Indeed, if the Fed's balance sheet were a country, it'd be the FIFTH LARGEST COUNTRY IN THE WORLD.
While the Fed has failed miserably to improve the economy in the US, it's done a bang up job of letting the inflation genie out of the bottle. Here's a chart showing the price movements of Oil and Agricultural commodities since the recession supposedly «ended» in June 2009.
I don't know how Ben Bernanke would look at this chart… but it sure looks to me like the cost of living has gone UP in the US. Oil's gone from $70 to nearly $100 per barrel. And agricultural commodities have risen more than 20%.
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.
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 to you think QE 3 (which is unlimited) will do to the cost of living?
The time to start preparing is now. The printers are running. The Great Currency Debasement has begun. Some folks will walk out of this mess winners. Most will walk out as losers.