Federal Reserve May Not Sell Mortgage-Backed Securities After QE
July 15th, 2013
The Federal Reserve has been attempting in vain to prop up the housing market ever since it crashed in 2007. Ben Bernanke and his cronies have engaged in some of the most radical experiments ever conducted on the world’s money supply. Meanwhile, US economic growth crawls on at a dismal pace and a nationwide unemployment crisis continues unabated.
Investors are in a state of paralysis, fearing the moment when the Fed will finally stop juicing the markets with quantitative easing, a fiscal equivalent to anabolic steroids with similarly unhealthy side effects. Bernanke and company chose an arbitrary unemployment measure as the end-point for the program, which may come to pass before the end of 2013, possibly sending interest rates skyward and unleashing a recession. Now, as Profit Confidential notes, the latest Federal Open Market Committee minutes seem to indicate that the Federal Reserve will not sell the mortgage-backed securities that it purchased during the QE program. Does this mean that serious inflation is on the way? Is the real-life Federal Reserve on pace to establish its own Strategic Housing Reserve, much like the one that appears in Silver Circle? Let’s examine.
Propping Up the Housing Market… Forever
After the 2007 housing market crash, the US government and the Federal Reserve have been using every trick in the fiscal playbook to artificially prevent the market from allowing home prices to fall to the natural levels that consumers are willing to pay for them. However, this has been made possible by the Federal Reserve’s own willingness to purchase securities backed by bad mortgages. All along, Fed officials have indicated that this tactic might leave the private central bank holding too many bad mortgages to remain profitable after quantitative easing comes to an end.
The above-linked Profit Confidential article references the July 2013 Federal Open Market Committee meeting minutes, during which this was said, “Most [members], however, now anticipated that the Committee would not sell agency mortgage-backed securities as part of the normalization process, although some indicated that limited sales might be warranted in the longer run to reduce or eliminate residual holdings. A couple of participants stated that they preferred that the Committee make no decision about sales of MBS until closer to the start of the normalization process.”
The Fed Can’t Prop up Home Values Forever
By refusing to sell mortgage-backed securities, the Federal Reserve would be able to delay reporting losses in value on the MBS purchases. Selling them would expose the true value of the mortgage-poisoned products to the market, which would be deflationary in nature at the Federal Reserve’s expense. Instead, the private banking cartel may choose to jettison the economy rather than its own balance sheet, thrusting America into deeper inflation by effectively monetizing these dead-end loans. However, there is one alternative outcome that could in theory emerge from a move like this: the Federal Reserve itself may collapse under the weight of its own foolish purchasing decisions.
When the Silver Circle movie first went into production years ago and before the Federal Reserve began buying mortgage-backed securities in real life, it was decided that the fictional Federal Reserve in the film would establish a Strategic Housing Reserve program, through which homes are taken outright in an alleged effort to stabilize the housing market. It’s almost as if Ben Bernanke read the Silver Circle script before attempting to centrally-plan the world economy.
Let’s hope this quantitative easing madness ends soon, or else we’re in for a serious cataclysm when the rubber band holding back six years worth of unpaid debts finally snaps and unleashes all its fiscal poison on the world economy.
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