[Editor’s note: Thursday’s commentary drew such a strong reponse that I’ve extended its run by a day. RA]
We suspected years ago that the day would come when the Fed would have no more room to move. Administered interest rates were bound for zero, and once they got there easing would cease to be an option. Except that we were wrong. Now it turns out the Fed can, and will, ratchet up the desperation meter, already well into the red zone, to new and untold heights, stepping up purchases of long-term Treasury debt with proceeds from the sale of mortgage-backed securities from the central bank’s fatally swollen dumping-ground-of-a-portfolio. Bernanke’s cheering section always said he would do whatever it takes, but perhaps it’s time for them to acknowledge that, in actuality, he is doing not what it takes, but only what he can do, short of triggering a hyperinflation. Surely the Fed chairman’s minions must be disappointed that his latest, unprecedented attempt at stimulus has a cash value estimated at only $300 billion – a mere pittance in a global Ponzi game valued nominally at perhaps three thousand times that. Paul Krugman, the New York Times’ hairy-knuckled Keynesian, must be asking himself whether Helicopter Ben is ever going to get serious. Sorry he has let you down yet again, Mr. Krugman.
Although earlier predictions we’d made here may have overlooked this latest, hopeless step the Fed has taken, let us hazard another prediction by which you can judge for yourself our foresight, or lack thereof. To wit: The Fed’s suicidal, capital-destroying bond-buying ploy may suffice to jolt the mountebanks, imbeciles, pedophiliacs, thimble-riggers, thieves and suppurating grey matter on Wall Street into pretending that “something” has happened, but the likelihood that this “something” will have a positive, long-term impact on the economy is about as close to zero as a Martian assault force landing this weekend on Coney Island.
Brave New World
What it will accomplish, however, is lowering the yields on Treasury debt and other “safe” paper so that savers will be cheated out of a fair return on their capital even more brazenly than before. You ask, who needs savers when The Gubmint can gin up however much money it needs to pay for things (almost none of which contribute to sustainable economic growth)? That question does indeed capture the cynical essence of the Fed’s monetary calculations at the moment, and those calculations are at least technically defensible. But when the inevitable day comes that the central bank’s reckless policies have reduced the financial landscape to smoking rubble, in the process destroying whatever horribly misplaced trust may have attached to fiat dollars, it is predictable that savers will be courted by the banks as though they were royalty.
Savers of what, you might ask? Not of dollars, since they will be worthless, but of whatever medium has survived as a store of wealth when the ashes have settled: Gold, almost surely — but also any other medium of exchange with which a prudent lender could advance a sum against his own immediate wants. Is any of us so wise as to be guaranteed a constructive role in that brave new world?
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SDavid –
Taking all people as one social being, has anyone really beat ‘themselves’, as the current governmental form is a reflection of the greater social state. There will always be 20 at the top, 60 in the middle, 20 at the bottom. Using a grand scale covering the 500 years on this continent, as a whole are we better off than we were in 1920, 1930, 1950, 1970, 1980, 1999, 2000, 2010.
In 1920 we were allodialists, our wives worked in the home, our children were primarily educated by us, we worked on our land, or if we worked in town, we still went home to a house we owned. We knew how to take the time to go on picnics and to go to a Saturday social, or talk in the parlor. All debt was paid down in 7 years.
Today we are indentured to a 400,000.00 debt forced upon us by a monarchy in succession, that debt after every asset is sold. The people give the government their children when they are 1 day, childcare, 3 years ‘headstart’, and at 5 years for formal propaganda. Husband and wife work 60 hours a week, to take a fancy vacation someplace they do not need to be. We are now serfs on the soil that our Fathers fought to make Free.
Today, there are 20 at the top of the slave trade “Task Masters”, the more one can control in Trade Pit, the better the task master, as futures control the productivity of the many to benefit a few. Guess that is better than being in the bottom 20 in the slave trade. We have Masters where before we had none – guess that is good for some.
If one believes he has beaten the Ruling Class at something, and if he believes he has beaten the government controlled by the ruling class, I guess that is just a matter of perspective. Liberty, versus being a task master ? Debtor in possession versus Free Hold.
What you speak of is just the social game of history. One person thinking he is better off than the ‘Jones’ next door. Loosing ground on Freedom is OK for the majority – just make it easy. The propaganda has worked. People think that tending the property of another is Grand as long as that property is bigger than Jones’s. People think allowing the government to train their children is Grand.
Somehow everyone I know makes money in Las Vegas.
I think that sums up everything here.