"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Friday, November 30, 2012

Federal Reserve Official Singing the Praises of Unlimited Money Creation

Late this afternoon, a story appeared on the Dow Jones newswire service relating a speech given by Federal Reserve governor Jeremy Stein. In his prepared remarks he defends QE3 and seems to be strongly arguing for an additional new round of QE4.

I must say that it certainly appears these monetary elites really do believe their own BS. If creating lasting prosperity was this easy, what in the world took mankind so longer to figure it out?

I think the most preposterous of his remarks was his claim that the ultra low interest rate environment being created by the Fed has allowed companies to refinance large portions of their current debt at "cheaper, longer-dated terms". This, he claims, helped strengthen the economy and "was a good thing from a financial stability perspective".

Yes, that is not a misquote.

Anyone who trades the markets for a living will tell you that the Fed's actions have created unprecedented volatility as its actions are intended to counteract the deflationary forces arising from the excessive levels of indebtedness that are swamping over the entirety of the global economy but particularly those economies of the fading West.

Instead of allowing the system to clear, as painful as that will be, the Fed continues to try to entice additional borrowing by forcing down long term interest rates to insanely low levels. This, they claim, is a good thing.

There is however a nice, dirty little secret that Mr. Stein, more than likely inadvertently, let out of the bag. Here is the takeaway quotation....

Research shows "Treasury buying is associated with increases in stock prices, which in turn can have wealth effects on consumption and investment".

There ya have conclusive proof that a major strategy of the Central Bank is to produce enough funny money to jam the stock market higher and by so doing, make consumers feel wealthier as they examine their 401K's and retirement portfolios as well as inducing businesses to expand based on a rising price for their stock.

To hell with the impact that this will have on the middle class and average American citizen over the long term. While they may "feel better" now that the Fed has been successful in creating paper asset inflation among stock shares, they are going to "lose that lovin' feelin" when this same deliberately designed inflation shows up in food and energy prices.

Yes indeed, America thanks you Mr. Stein, you and the rest of your shortsighted fools at the Federal Reserve.