And That’s Checkmate, Ben Bernanke
http://albertpeia.com/checkmatehelicopterben.htm
{ It’s really quite amazing that the so-called economic experts, ie., economists, financial/securities analysts, CEO’s, etc., are so economically challenged so as to believe beyond the self-interested ‘swallow’ (ie., paper inflation, etc.) that somehow printing/creating ever more worthless/debased paper fiat currency will in some way create real value, production, jobs, etc., as opposed to the destructive mechanism along with nefarious dislocations that it truly is. }
‘Today the US Federal Reserve
announced that it would be implementing QE 4: a policy of spending $45 billion
per month buying Treasuries on the long-end of the yield curve until employment
falls to 6.5%.
So between this and QE 3 which
was announced just two and a half months ago, the Fed will be printing $85
billion per month.
First and foremost there is no evidence
that QE creates jobs. Consider the case of the UK.
Since the crisis began, the Bank
of England (BoE) has announced QE efforts equal to $598 billion in the UK. The
UK’s GDP is $2.43 trillion. So the BoE has engaged in QE equal to over 20% of
the UK’s GDP.
Despite this massive amount of
QE, 2.53 million people are out of work today in the UK, up from 2 million at
the start of the Great Crisis in 2007. Similarly, the UK’s GDP remains well
below its peak.
In simple terms, QE fails to
generate economic growth or jobs. End of story. The BoE spent 20% of the UK’s
GDP on QE (a truly staggering amount) and more people are unemployed now than
when it started. And GDP has yet to get even close to its pre-Crisis highs.
The same can be said of Japan
which has implemented QE over 20% of its GDP. There, as has been the case in
the UK, there is no evidence that QE has created jobs or even economic growth.
So the Fed is flat out lying in
its claim that QE will create jobs. There is no evidence that this QE does
this. So the Fed is announcing this new program for a different reason.
Regardless of the reasons,
Ben’s got a major
problem on his
hands. That problem is the fact that Treasuries are on the verge of breaking
their upward sloping trendline. If Treasuries begin to collapse at a time when
the Fed is buying up over 70% of debt issuance, then the Great Treasury Bubble
is finally about the burst:
If we take out this line when
the Fed is buying as much Treasuries as it is, then it’s game set and match for
the Fed. Take out this line and you’re on your way to ending the 30+ year bull
market in bonds.
Which means:
1) Interest rates
will be soaring
2) The $700 trillion
derivatives market most of which is based on interest rates will suffer some
systemic events
3) The Fed’s
interventions are finished
We’ll have to wait to see how this
plays out, but we’re getting dangerously close to a US debt crisis
that will make 2008 look small in comparison.
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Best Regards,
Graham Summers