… Next I want to discuss a subject that should be easily visible, but again a lack of basic common sense prevents most people from seeing what’s right in front of them.
I’m talking about inflation. Now if you believe the government’s ridiculous CPI numbers, or the talking heads on TV, you might come to the conclusion that printing $85 billion a month has no long term side effects. You would of course be 100% wrong.
It causes inflation. Money printing always has and always will cause inflation. This time is no different than any other time in history. I can assure you that Bernanke hasn’t been able to repeal the natural laws of the universe. As a matter of fact, we have had massive inflation since the bottom in 2009.
Because the Fed targets asset prices, it tends to start in those areas that we don’t normally associate as inflationary. No one is going to freak out about a rising stock market, but that is the first sign of inflation. The Fed’s liquidity has to land on something, and it usually starts in the stock market first. Unfortunately, it always eventually ends up in…
…The reality is, the Federal Reserve is like any other organization. Human. And fallible.
And like any other organization, it makes its best assessment of what the future holds and places its bets accordingly.
For those who want to argue that the Fed, with its cadre of hyper-degreed academics and its insider access, has superior information and thus the ability to predict the future with unparalleled accuracy; I humbly ask you to watch the following:
The monthly figures for the US dollar components of Austrian, or True Money Supply, for February are now in. TMS plus excess reserves amount to the quantity of money that can be drawn down without notice, including time deposits that in practice can be instantly drawn down without notice, only foregoing interest. This is shown in the long-term chart below.
The black dotted line is the exponential track, which it followed closely until the US government abandoned all gold convertibility in 1971, and continued to do so with a few wobbles until 2008, when TMS took off and became hyperbolic; that is to say it began expanding at a greater rate than exponential. This chart is the clearest way to illustrate the accelerating debasement of the dollar.
It also serves as proxy for the yen, pound and euro, which are also being issued at ever-increasing rates. The move into hyper-drive was sparked by the central banks responding to the banking crisis, but today there are four reasons why money issuance will probably continue on this hyperbolic path.
Today’s unbacked fiat currencies are at the root of an emerging global monetary problem. While the talk of “recovery” in recent months now populates headlines, the desperate actions of politicians and central bankers show the contrary.
The Federal Reserve (Fed), European Central Bank (ECB) and the Bank of Japan (BOJ), cannot stop creating new base money. Central Banks want to present confidence to the markets. Where the risk lies for monetary policymakers is in the value of the debt on bank balance sheets, and the value of the debt across the broader economy. This debt is being held at par because interest rates should be much higher. All of this has led to a situation where interest rates do not reflect true inflation….
Doug Casey: ‘We are living in the middle of the biggest bubble in history’
“When you have money in a bank, you have a risky investment”
Alan Greenspan ~ The Federal Reserve Is Above The Law