Sunday, November 7, 2010

Take it from Someone Who Knows

Well, the movie about QE is now in theatres.  Make sure you check it out:

I had a good laugh after catching this.  I thought a lot about our decision to officially money print last week.  The blogosphere has been on fire since the QE announcement.  The Fed is getting brutalized by pretty much everyone except for a few Paul Krugman fans.

It's been interesting to watch the reaction of the financial world to Ben Bernanke's decision to start money printing.  I was curious to see what Germany would have to say about this because they have seen this show before...Wiemar anyone?

Needless to say they were not happy:

"German Finance Minister Wolfgang Schäuble has sharply criticized the US Federal Reserve's decision to pump a further $600 billion into the country's ailing economy. He says the move could create problems for the global economy. Others have joined in the condemnation.

"I don't think they are going to solve their problems that way," Schäuble told German public broadcaster ZDF in a Thursday evening interview. "They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous."

German Economics Minister Rainer Brüderle, of the business-friendly Free Democratic Party, Chancellor Angela Merkel's junior coalition partners, is likewise skeptical that the Fed's path is the correct one. "I view the move with concern," he told reporters in Berlin on Thursday, adding that he doesn't think that a more liberal monetary policy will necessarily boost the economy. "It isn't enough to set out the water. The horses have to drink too."

My Take:

Ummm.....You can't get anymore direct then that.  The money quote above is the last sentence.  Essentially what he is saying is you can lead a potential borrower to money but you can't make them borrow.

This is essentially the whole problem in a nutshell.  The Fed is providing trillions of dollars that no one wants.  America has decided that they have borrowed enough(they are up to their eyeballs in debt) and they don't want to borrow anymore.

The Fed continues to sit here and try and shove it down our throats.  They have been trying this now for 3 years.  I't hasn't WORKED. 

What's Einstein's definition of insanity again?:

"Insanity is doing the same thing over and over again and expecting different results."

Is it a stretch to say that Bernanke is now officially insane according to Einstein's definition?

I don't think so:  How many rate drops and QE's have we done so far?  I've lost count.  Have any of them worked?  No.  It's kept a few things artificially propped up.  Overall, it's clearly been a horrendous failure according to Germany's Financial experts above.

It's clearly obvious that Ben has run out of options.  This is a desperate move by the Fed.  They realize that there is no demand in the economy for over priced assets.  No one wants to spend $500,000 for a house in a nice suburb anymore.  No one wants to buy treasuries that are owned by an insolvent country that yield nothing.

Anyone with a brain realizes that this will not end well.   Ben knows it too but he doesn't seem to have enough character to end this ridiculous QE idea.   He looks more and more like an academic who is obsessed with stopping deflation.

He has been called the leading expert on the depression.  My retort to that is who in the hell made him the expert?  He wrote a paper on it. Big deal,  I have written lots of papers too....Does that make me an expert on anything?  Hell no.

He obviously didn't spend enough time reading about hyperinflation. This guy has to be stopped because inflation is going to hit and when it does it's lights out.

It's time to put away the printing machines and let the markets decide valuations instead of the Fed.  People want to buy houses but they have no desire to overpay for them.

By keeping rates at zero they are guaranteeing that we see an inflation crisis.  It's already starting.  Gas is now back over $3.  They are also robbing savers with these easing policies as yields on treasuries and CD's have dropped down to practically nothing. This has paralyzed millions(especially the retirees).

As a result, the savers are beng forced into the stock market and other risky assets in an attempt to find yield that the elderly depend on in order to live.   The problem is the are jumping into stocks at over inflated prices. 

When inflation hits it will be a double whammy for the markets which means many savers who never wanted to own stocks in the first place will get wiped out as earnings collapse:

The "double whammy" is:

1.  Corporate profits will get crushed because input costs will rise due to inflation.

2.  This catastrophic inflation will drain discretionary spending by the consumers because they will be forced to spend more money on essentials like food and gas.

This will set the markets up for a devastating crash which will leave millions in this country owning with empty 401k's and over priced houses that they won't ever be able to sell.

Ben, put the helicopter away and take the banks into receivership before you destroy this country.

It's time to pay the piper.  If you don't stop you will force me to buy calls on wheelbarrow manufacturers.

Germany obviously hasn't forgotten what happened to them as you can see above.  Bernanke apparantly has:

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