The Fed’s Last Hurrah

Getting ready to watch the last debate with the topic of “economics,” which should be good for a laugh.

Just wanted to share my thoughts on what the Fed is up to….

Putting yourself into the Feds shoes, I mean literally diving into the crown of Bernanke’s head and becoming “The Fed,” you have to answer “what do we need to do to save the markets?”

The answer has been to guarantee everything (FDIC, bank deposits, loans, you name it) and make sure the banks loan money to stimulate business.

First, lets take a quick look at what changed in the last few years. The only thing that has really changed is the consumer no longer has equity in their houses to spend, so the consumer stopped spending. Businesses have cut back so they too aren’t borrowing. And guess what? Banks have screwed up so much with their lending practices that they can’t even borrow from their fellow banks at a reasonable rate any longer.

Consumer spending has fallen for 3 straight months. Since the consumer makes up 75% of GDP, and they aren’t spending, the Fed was left with only one option…to get the banks to lend…anyway, anyhow. If the banks aren’t lending, then the economy comes to a halt. Oh wait. Too late. Businesses won’t be borrowing (except those that have to pay their payroll and pensions). And then there’s the State’s problems. Governor Arnold is on the radio asking for $4 billion as we speak!

To recap; consumer isn’t spending or borrowing and business isn’t spending or borrowing. You tell me what tricks the Fed has left when the only thing that props up GDP and the dollar (outside of the war machine) is broken…

Inflating like mad is only a temporary fix. So far the dollar is responding to a demand for treasuries than a reduction of the money supply. There is nothing left in the Fed’s bag of tricks except to tax, but we know that won’t go over well, but they will anyway. Higher interest rates will come, but they will fail in support of the game known as the dollar. Hyperinflation is on the horizon. All that’s left is for them to start confiscating your assets to try and prevent that. Will the police state grow big enough by then to remove the second amendment? Stay tuned…

13 trillion in debt
60 – 70 trillion in future debt for social security, medicare, and the welfare/warfare state…to name a few
unemployment on the rise
GDP falling like a rock
Infrastructure falling apart
the list goes on….

The Fed’s Solution? Spending your children’s and grandchildren’s inheritance = more debt…don’t let them fool you with promises of a return on your investment (otherwise known as the bailout).

Lastly, other countries cranking up their printing machines is just a temporary fix as well…

OK, the saviors of America just started debating…don’t believe a word they say…

Doug Eberhardt

Related posts from the Fed Up Blog:

1. The Fed Is Relevant…. For Now…. However…..
2. Bernanke and the Fed Have Saved Us: Recession is “Very Likely Over” Don’t Believe It!
3. Current Thoughts on the Stock Market: Caveat Emptor!
4. What Really Backs the U.S. Dollar?
5. The Demise of GM and How the U.S. Is On the Same Course “As GM Goes, So Goes the Nation”