Fed News Friday: Pausing the Printing Press? Yea Right.
September 16th, 2011Is the Fed pausing the printing presses, or not? On August 26th, Federal Reserve Chairman Ben Bernanke gave a speech in Jackson Hole, WY, which was widely expected to contain an announcement of a third round of quantitative easing. In his remarks, Bernanke did not announce another round of so-called quantitative easing (QE). Does this mean the Fed has found sanity and is stopping its easy-money policies? Hardly.
Yesterday, September 15th, the European Central Bank announced a massive effort to loan US Dollars to financial institutions. The shocking (well, regular readers of this blog probably won’t be shocked) part of their announcement was that they listed several other major central banks as partners in this effort, among them was the Federal Reserve. In the ECB’s words (emphasis added):
The Governing Council of the European Central Bank(ECB) has decided, in coordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, to conduct three U.S. dollar liquidity-providing operations with a maturity of approximately three months covering the end of the year.
If you follow European financial news, then you probably know that rumors are swirling that some major banks are on the verge of a Lehman Brothers style collapse. This announcement all but confirms these rumors to be true. Financial journalist Max Keiser has been saying for years that the debts on these banks’ balance sheets are almost infinite and that they will continually “find” new debts that need to be dealt with. In a free market, dealing with the debt means the banks liquidate the debt and/or go bankrupt, but, in the minds of the Keynesian central planners that run the world’s central banks, the solution is to bail out the banks with obscene amounts of newly created money.
When dealing with the sort of underhanded snakes that run the ECB and the Fed, you need to be able to read between the lines. Over the past year, much of the previously hidden information about the Fed has been exposed, the most relevant bit of which is that the Fed regularly provides billions of dollars to foreign central banks. What the ECB is telling us with this announcement is that there are some serious problems with the European financial sector and they intend to draw heavily on their line of credit from the Fed to try and paper those problems over. Of course, the effect will only be to forestall a crisis and spread the pain amongst the general population.
Bernanke kept the rhetoric as uncontroversial as possible in his Jackson Hole speech since it has become undeniably clear these days the Fed is part of mainstream political discourse. The Fed’s policies, however, haven’t changed to reflect their uncontroversial rhetoric, as the ECB’s proxy announcement signifies. Less than a month after Bernanke suggested there would be no more QE, the Fed is backing an historic round of QE on another continent. That should serve as yet another reason to end the Fed.
Author: John Jones is a Maine native and libertarian activist. From 2005-2009 he served in the US Air Force as a Pashto linguist, during which time he became aware of the corruption inherent in the military-industrial complex.Which, in turn, led to an interest in economic issues. Since leaving the Air Force he has been active with groups like Students for Liberty and Young Americans for Liberty.
