Jim Sinclair’s Commentary
The Fed is not trying to help business. It hopes that QE might by some miracle do that, but this is not the main motivation.
The Fed has been feeding the banks by sending them money at almost no cost with which they buy treasuries, a camouflaged form of QE. Now the Fed is directly buying Treasury issues, which is QE in daylight.
The evidence of this is in the less than enthusiastic action of the bond market in all maturities.
The primary reason why QE is now, and why it will continue to infinity is the need of the Treasury to borrow in order to finance.
Courtesy of Greg Hunter’s USAWatchdog.com
What is happening in the economy is signalling enormous changes for the U.S. and the world. The scale of what the Federal Reserve is doing is unparalleled in human history. No country has ever produced so much money and so much debt in such a short amount of time. The Fed has embarked on another round of money printing (Quantitative Easing or QE2). It has been reported that it will buy $600 billion in Treasuries and another nearly $300 billion in mortgage-backed securities. In a statement nearly two weeks ago, The Fed left its plan of money printing open-ended. It said it would, “regularly review the pace of its securities purchases and the overall size of the asset-purchase program in the light of incoming information and will adjust the program as needed.”
All the fancy financial terminology and complicated skullduggery can be boiled down to a simple phrase or two. The dollar is being debauched at the hands of the Fed, and the massive debt and future commitments we owe will never be paid off in “real” money. Boston University Economist Laurence Kotlikoff says the real amount America is on the hook for is $202 trillion. For perspective, just one trillion dollars is a stack of $100 bills nearly 68 miles high!
The Fed is trying another round of QE, even though the first instalment of $1.7 trillion did not work to actually repair the economy. We spent another $2 trillion in TARP and other stimulus that was, also, supposed to fix the economy. It’s a grand total of $3.7 trillion just in the last two years. (Some say it’s more than $12 trillion spent or committed.) All this money printing did inflate stock prices. It also helped out the big banks. It worked so well they are paying a record $144 billion in bonuses this year. What did the man on the street get?–foreclosure fraud and higher unemployment (22.5% according to Shadowstats.com). Now, the money is running out, and the Fed is back to printing to keep the economy from falling off a cliff–again. Nothing has been fixed; the day of reckoning has just been postponed, but this cannot go on forever. At some point, the U.S. dollar will take a severe plunge, and inflation will hit America with a vengeance.