Last week, the Federal Reserve announced that it was not starting a third round of money printing (QE3). (Don’t worry, it is only a matter of time before the money printing will begin again in earnest.) Fed Chief Ben Bernanke put that thought out after the much awaited Fed meeting in Jackson Hole, Wyoming, wrapped up. I say QE3 already started when the Fed locked in 0% interest rates for the next two years. The economy is in the tank, and the Fed admitted it is guaranteed to stay there.
One writer’ who has been way ahead of the curve on the economy, is Jim Willie. In the last 5 years since I have been reading his work over at GoldenJackass.com, Mr. Willie has made many correct calls and predictions. Mr. Willie holds a Ph.D in statistics from Carnegie Mellon University. Few people can crunch the numbers and come to the correct conclusions before him. His latest post is called “Illusion of Stable Currency Vortex.” Please read his work below to get his take on how desperate and powerless the Federal Reserve has become. According to Mr. Willie, world economies are in a very bad place, and they are NOT going to a better place anytime soon. Please enjoy the post.–Greg Hunter–
Illusion of Stable Currency Vortex
By Jim Willie
The Jackson Hole Conference was a dud. To the astute student observer, something happened never seen before. The US central bank chief admitted failure, if only people could properly interpret and translate his words of helplessness and disappointment. A more apt description was that USFed Chairman Bernanke used the forum to announce on stage that the central bank failed and is powerless to react to the current lapse into recession. Many watchers no longer believe that a Quantitative Easing chapter #3 will be announced. Surely it will come sooner or later. Watch the USTreasury auctions for the best clue. The QE2 program was about prevention of auction failure, not economic stimulus. A quick review of monetary policy and its effect is horrifying for its utter complete failure. The FedFunds rate has been under 0.5% for three years, yet neither the USEconomy nor the US housing market have recovered. That is a first in history. The USFed gobbled up over $1 trillion in toxic mortgage bonds and related derivatives, also with no resulting rebound in the housing or mortgage finance markets. The QE2 debt monetization program averted USTreasury auction failures, but the bold monetary inflation gesture sustained for several months did cause a backfire. It lifted the entire cost structure to the USEconomy in painful fashion. The profit margin squeeze and household spending squeeze have been radically evident and deeply damaging.
Chairman Bernanke admitted on stage before his peers, in full admiration of his failure and lost leadership, that the USFed has no more tools at its disposal, and that the USEconomy must recover on its own. For the first time he mentioned tools at his disposal without delineation what they were. He has none. His heavy doses of liquidity to treat insolvency have not succeeded in achieving anything except higher costs without job growth. He even attempted to point the finger of responsibility to the USGovt for its budget extravagance and intractable deficit. Big Ben has crashed his helicopter without any cash drops on citizen homes. Worse, he has shown all on stage that he has nothing under the hood, and that the bulge below is nothing but a massive paperwad in his pocket. The USFed is impotent. Its board members are in open dispute on the chosen path for QE3, even the scored success of QE2. The US Federal Reserve is a failure, its franchise system a failure, its monetary policy a failure, its balance sheet a failure, its analysis chronically incorrect, its initiatives in backfire, its toolbag empty. Perhaps it is time for the USFed to resign its contract with the USCongress. The crowning blow should have been the $16 trillion in unauthorized loans to global banks, given cloud cover by the TARP Fund and its confusion. This is a syndicate fortress with its own agenda, nothing more. (Click here to read the complete and well written post from Mr. Willie. You will be happy you did!)