Fed News Friday: The Wall Street Journal Did Their Homework

April 29th, 2011

After Chairman Bernanke’s first-ever, post-policy meeting press conference, those of us dealing with this downward spiral have not gained any new insights. Bernanke stated that the country was improving and they were seeing a “moderate” increase in overall production, while employment still lags. If you come from the liberty “side of the aisle” you know we could have predicted the outcome of the Fed’s master QE2 plan and its execution, however for the mainstream media and the Fed themselves, we had to figure it would take a minute for them to catch up to reality.

In an article following the inaugural press conference of a FOMC meeting, the Wall Street Journal decided to take a closer look at QE2 and its overall achievement. Bernanke clearly wasn’t very convincing in his speech because the Wall Street Journal is hot on his trail:

“It’s worth looking at the mechanisms involved. QE entails buying government bonds and thus driving down longer-dated yields. Low benchmark yields force investors to seek better returns elsewhere and thus migrate to equities and corporate credit. At the same time, expectations the central bank will achieve what it’s set out to, in other words, a recovery, lends further support to share prices.

But very low yields also reduce the opportunity cost of holding assets which, unlike equities, don’t generate income. Such as commodities. If investors start to fear the inflationary consequences of very loose monetary policy, they will seek to hoard physical assets. Not just oil, but copper, zinc, cotton and precious metals. And, of course, all of those commodity prices have been going up.“

So if we revert back to a previous Silver Underground post where we talked about money and its value, we would remember that the more you have of something the lower its worth. In the situation we are in today, the Federal Reserve has not only pushed more and more dollars into the system by bailing out banks and companies, foreign and domestic…but it’s done it TWICE! After the first round of quantitative easing the economy supposedly was improving, but if that was the case why on earth was QE2 proposed a year and a half later?

Bernanke continues to defend this type of monetary policy which is nothing more than printing money out of thin air, prolonging a double-dip recession, not preventing it. So while he’s bragging about maintaining inflation at 2% and being the hero in the night that saved us from a possible depression, the rest of us wait for QE2 to let us down…oh wait it already has and Wall Street Journal is even noticing:

“…inflation is picking up in the U.S. as well. Mr. Bernanke’s strong inclination is, like Mervyn King at the Bank of England, to ignore inflationary overshoots until the economy is on an even keel. Mr. Bernanke would probably welcome 4% to 5% headline inflation for a couple of years.

But, politically, that would be unacceptable. Which is why Bernanke made it clear at Wednesday’s press conference that QE3 is unlikely.“

So my guess is we should prepare for the Fed’s next tactic: watch interest rates rise from their insanely artificial rate of .25-1%. Lending money out of thin air in a time where you need to be saving is devastating to the economy. When you know you are low on production and funds as an individual, what do you do? Save and wait for things to bulk back up and improve. Now why is it that the Federal Reserve thinks they can run their finances any differently?

So I say keep hoarding America. Keep being responsible with your funds. I wouldn’t suggest hoarding paper though, unless you’re low on toilet paper ;)


About the Author: megan

Megan is the Marketing Manager for Silver Circle who spends endless amounts of time on making sure the word gets out about this film and graphic novel! As a liberty activist since '08 she also has gained a passion for advancing liberty in her personal life and helping others to do the same. Questions about getting involved with the film, events, liberty, and hip-hop can go straight to her!