August 3, 2012 By gpc1981
http://albertpeia.com/bernankeputalie.htm
‘Now, about that Bernanke Put.
Many people believe that because
Bernanke once talked about dropping money out of helicopters to fight deflation
that he literally meant that he would do this if push came to shove. He didn’t.
The whole thing was a bluff meant to prop up the markets: the famed Bernanke
Put.
Truth be told, this bluff is probably
the smartest thing Bernanke ever did. By threatening to leave a paperweight on
the “print” button, he convinced the market and all of Wall Street that the Fed
would always be there to step in and save the day.
Let’s say the Fed just hits “print” and
prints TRILLIONS of dollars to monetize everything under the sun. If this
happens then the bond market will implode taking down the
Moreover, it’s not as though “printing”
solves a solvency crisis. Instead it results in a loss of faith in the
underlying currency, which causes hyperinflation (this is exactly what happened
in
So printing is ultimately a useless
concept. But what about debt monetization? Couldn’t
the Fed just print tons of money to buy Treasuries and other debt instruments?
The answer here is ALSO a resounding
“NO.”
The reasons are three-fold:
1) Inflation
2) Political consequences
3) Draining Treasuries from
the banks
The last time the Fed instigated QE, food
prices went through the roof resulting in riots and civil unrest around the
globe. Today, food prices are already soaring due to severe droughts. The Fed’s
hands are tied here.
If the Fed engages in QE, the political
consequences would be severe. QE 2 alone made the Fed front page news in a BAD
way, resulting in the Fed going into major damage control mode: op-eds about Bernanke being a regular guy, town hall meetings,
etc.
Finally, one has to question… does the
Fed really want to be draining
Treasuries and Agencies from the banks’ balance sheets? After all, the big
banks, which sit on over $200 TRILLION worth of derivative trades, only have $7.12 trillion in assets.
If the Fed were to engage in QE it
would suck some of these assets out of the banking system resulting in the
banks being even more leveraged
and susceptible to collapse.
Bernanke knows this. He even admitted
it recently, saying, “If the Fed owned
too much TSYs and Agencies it would hurt the market.“
So the Bernanke Put is a lie. The
markets will be realizing this in the coming months if not sooner. When they
do, we’ll see the REAL Collapse: the one to which 2008 was just a warm-up.
This is the kind of
“unquantifiable” research that we specialize in at Phoenix Capital Research: finding
the insights and data that lurk between the financial statements and press
releases… the insights that will really
move the markets.Doing this has allowed us to show
our Private Wealth Advisory
subscribers a REAL return of 34% over the last 12 months.And
we’ve done it without using options or futures, just stocks and ETFs which nearly ANY investor could buy using a discount
brokerage account.Just as importantly, we’ve
accomplished this incredible return without taking on excessive risk. Indeed,
we haven’t closed a single losing trade in over a year.If
this kind of high profit/ low risk approach to investing sounds like your cup
of tea, we strongly suggest you try out a Private Wealth Advisory
subscription.To find out more about Private Wealth Advisory
and how it can help you grow your portfolio in good times and bad…Click Here Now!
Graham Summers, Chief Market Strategist,