ALBERT EDWARDS: Bernanke’s Easy Money Train Is About To Crash, But The Fed’s Too Scared To Jump Off
“I?’ve read quite a lot overnight about the Fed backing off on its tapering of QE,” wrote Edwards. “I think the excellent Gavyn Davies who writes in the FT nowadays had it spot on with his title “Never underestimate the Fed’s dovishness”. Personally I am incredulous. I can believe the arch dove Bernanke might have wanted to keep blowing his bubbles but I am amazed that he got the rest of the Fed, or at least the majority, on his side. I am also amazed because the Fed has spent weeks setting the markets up for a taper.”
“Their word is apparently not their bond if bonds don’t like their words!”
Citing the work of his former colleague Dylan Grice, Edwards speculates that Bernanke and the Fed are aware of the risks, but they’ve back themselves into a corner.
“They’re printing money because they’re scared of what might happen if they don’t,” added Edwards. “This very real political dilemma is what is missing from the simplistic understanding of inflation as ?always and everywhere a monetary phenomenon.? It?’s like they?re on a train which they know to be heading for a crash, but it is accelerating so rapidly they?re scared to jump off.”
And that brings us to Germany’s Weimar-era hyperinflation. From Edwards:
Incidentally, this is exactly the train Rudolf von Havenstein found himself on as President of the Reichsbank during the German hyperinflation. According to Liaquat Ahamed?s work on von
Havenstein?s dilemma, in his majestic book ?Lords of Finance’ ? ? were he to refuse to print the
money necessary to finance the deficit, he risked causing a sharp rise in interest rates as the
government scrambled to borrow from every source. The mass unemployment that would ensue, he believed, would bring on a domestic economic and political crisis, which in Germany?s [then] fragile state might precipitate a real political convulsion?. Plus ça change!
UBS: The Fed Is Going To Regret What Happened Yesterday
Druckenmiller: Fed lost chance for a ‘freebie’ in not tapering
‘A bit of a bubble’ in stocks: Berkshire director
The stock market “doesn’t look so cheap,” Berkshire Hathaway board member Meryl Witmer told CNBC on Thursday.
“The whole thing about keeping interest rates low, people put money into stocks because they want the yield, or they’re gambling, or they’re getting nothing on their cash. That really adds to the speculative environment. A bit of a bubble. And at some point you have to pay the piper,” said Witmer, who is also general partner at Eagle Capital.
Witmer spoke in a “Squawk Box” interview.
Food stamp rise shows ‘Recovery That Wasn’t’
Census: No sign of economic rebound for many
This Rally Isn’t For Real
State of the World’s Economy Is Dire!
We are now back to the “green shoots” era of false hope and total misunderstanding of the real state of the world economy. There are minor tidbits of good news that combined with manipulated and seasonally adjusted economic figures are giving politicians worldwide reason for spreading their optimistic gospel of recovery that has nothing to do with reality.
A world based on debt
How can a world with $250 trillion of debt and over $1 quadrillion of worthless derivatives ever recover? Of course it can’t, especially since this is a world that is supported by legs of worthless printed paper money – legs that are just getting longer and more unstable by the day as trillions are added to the debt every year.
Wherever we turn Europe, USA, Japan and many other nations, the situation is totally beyond repair. But as I have said in recent interviews and articles, it is not just beyond repair but we are likely to be at the end of a major economic cycle that started at the end of the Dark Ages. I wrote about this already back in 2009 in my article“The Dark Years Are Here” . Major economic cycles take a long time to develop and if we are now at the beginning of a major downturn in the world economy, people living today will only experience the very beginning of the downturn. But sadly the beginning will be a major and very unpleasant upheaval that virtually nobody will escape.
We have had a century of false prosperity based on printed money and credit. In the last 100 years we have seen the creation of the Fed in the US (a central bank owned, created and controlled by private bankers) combined with fractional reserve banking (allowing banks to leverage 10 to 50 times), exploding government debt and a derivatives market of $1.4+ quadrillion. These are the principal reasons why the world economy has expanded in the last century and particularly in the last 40 years. These four extremely shaky legs, Central bank printing, Bank leverage, Government borrowing and Derivatives manufacturing have created a world of delusional wealth and illusory prosperity. Also, there is a total absence of moral and ethical values. We are in the final stages of an era of extreme decadence, an era that sadly cannot and will not have a happy ending.
BIS: The Most Powerful Bank In The World Announces The Crash