Never Ending Money Printing
by Greg Hunter
Originally posted May 02 2011
THE FEDERAL RESERVE HELD ITS FIRST PRESS CONFERENCE IN ITS 97 YEAR HISTORY LAST WEEK. In my mind, it did this because it recognizes the deep financial trouble the U.S. is in. It wants to put a positive spin on the mess it largely created and/or allowed to happen. After all, it was Tim Geithner who was the head of the New York Fed during the go-go years of the mid 2000’s. He was supposed to regulate the big Wall Street banks. You see how well that worked out—the entire system melted down and Geithner got a promotion to Treasury Secretary.
I’ll give my interpretation of a few of the important points the Fed was trying to get out to the public. Overall, the Fed wants people to keep their confidence in a system where money is loaned into existence. Yes, that’s right. Every time you swipe your credit card, you are not borrowing money but creating it. The banks love this because there is virtually no cost to them, and you have to pay back the money with interest just for the privilege of going into debt. Can you see why the Fed wants to keep this confidence game going?
My interpretation of a few specific points brought up in the Press conference hosted by Fed chief Ben Bernanke are: high oil prices are not the fault of the Fed; neither is the weak dollar, that is the Treasury Department’s problem even though U.S. dollars say “Federal Reserve Note” across the top of every single one of them; and finally (and this is my favorite), the second round of Quantitative Easing (QE2) will end by June 30th. (Click here for more on the Fed press conference from Reuters.)
The overt Fed money printing of $75 billion a month is going to end, but the covert money printing will not. It can’t because who will step in and buy all that debt at discount rates? Jim Rickards, Senior Managing Director for Market Intelligence at Omnis, Inc., thinks the Fed will still be printing “$750 billion” a year. Rickards wrote a piece about 5 weeks ago spelling out why he thinks QE will be “perpetual.” Rickards is a big thinker, and he is the insider’s insider.
He says, “The Fed is now like a 400-pound man who can eat 5,000 calories per day without gaining weight because his morbidly obese metabolism requires it to function. The discussion of QE, QE2 and QE3 has become irrelevant. What we have is permanent QE until such time as the Fed decides to tighten financial conditions. This is unlikely to happen until mid-2012 at the earliest, perhaps later in view of the housing double-dip and increasing oil prices. In any case, QE will be with us for an “extended period” no matter what the Fed announces.”