Monday, November 23, 2009

Folks Get Ready to Shred Your Dollar Bills

Folks it is time to put your office shredder to good use - shred any remaining dollar bills you may still have tucked in your wallet because even MORE money printing is on its way. Why you may ask - didn't Bernanke promise (just a couple of months back) that he will stop the money printing machines in March 2010, when he terminates the $1.25 trillion mortgage backed securities (MBS) buyback program? Yeah he did, but you did not make the mistake of believing him, did you? Well tough luck, because now he and his Fed cronies have changed their mind.
CNBC is reporting that St. Louis Federal Reserve bank's James Bullard is proposing that the Fed extend its Mortgage Backed Securities buyback program beyond its expiry in March 2010. According to Bullard:
The central bank should keep alive its mortgage-related assets purchase program beyond a planned end-date [of March 2010]. Bullard, who will be a voter on the Fed's policy-setting panel in 2010, said with rates near zero, keeping the purchase program alive would enable the Fed to react should the economy take another turn for the worse. "I'd hate to get the feeling that the Fed is saying our work is done," after the programs' end date, Bullard said.
So the Fed is expecting a double dip recession but is wilfully misleading the public with economic green shoots recovery talk.
Diving into a contentious debate among members of U.S. Congress over the role of the Federal Reserve, Bullard said that the independence of the Federal Reserve is essential for credible monetary policy and doubts about the U.S. central bank's ability to do its job without political interference could hurt the nascent economic recovery.Talk of eroding the Fed's independence can be counterproductive for economic recovery," the St. Louis Fed chief said in a presentation to a panel in New York.
With all due respect Mr. Bullard the Fed's monetary policy has zero credibility. Just take a look at the plunging dollar if you still have some doubts.
Bullard said that non-independent central banks have historically been forced to finance large government budget deficits. "This can be very inflationary," he added.
Mr. Bullard are you high? You can't be serious? Forcing a non-independent Fed to financing budget deficits is inflationary, but when an independent Fed wilfully print gobs of money to bail out their banking buddies...that is NOT inflationary? And pray, please explain how conducting a simple accounting audit of the Fed will open the Fed up to political influence on its monetary policy? That is akin to saying that Walmart's accountants are capable of influencing their pricing strategy.
Bullard batted back criticism that the Fed missed the brewing crisis, saying the central bank provided "important warnings" before the crisis began. He noted that his predecessor at the St. Louis Fed, William Poole, argued in the early 2000s that Fannie Mae and Freddie Mac were "ticking time bombs," while former Federal Reserve Bank of Minneapolis President Gary Stern published a book entitled "Too Big To Fail," warning some financial firms were growing too large for proper supervision. "These types of warnings show that the Fed is well aware of systemic risk concerns in real time," Bullard said in his slides.
Mr. Bullard we only have one question for you - if the Fed was 'aware' of the systemic risk why did they not do something about it? Thanks to the Fed's failure to do its job banana republic town is not too far away.


Anonymous said...

It seems like so much of what has happened in the last few months is a part of the extend and pretend policy. I don't understand how these short term fixes are going to mend the deep structural problems the financial system has embedded within. More extend and pretend I guess...

The Firecracker Report said...

You phrase it perfectly "extend and pretend" - that is exactly the game being played to fool the ordinary person on the street. Our politicians are either completely clueless or they lack the will power to offer the truth to the public. At this point we should have been having a national debate on what we can do to fix this problem.