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Of all the things that the Federal Reserve has gotten wrong, nothing infuriates me more than what Chairman Ben Bernanke is doing now. He’s not even being coy, either. He’s openly ADMITTING to his devious plan!
That plan? To make you act like a fool with your money!
I’ll explain how in a minute — and I’ll tell you how you can fight back, before Bernanke and the rest of his Washington bureaucrat pals separate you from your wealth!
How the Bernanke Plan Works—
and Why It’s So Dangerous!
We’ve had two devastating boom-bust cycles in the past decade and a half. The first was in tech stocks, the second was in housing. The common link between them? They were both aided and abetted by too much easy money from the Fed!
They were also made much worse by unbelievably misguided policy moves and forecasts about the future by Fed officials — Alan Greenspan first and Bernanke second.
Who can forget Greenspan’s 1990s-era speeches extolling the virtue of the technology and productivity “miracles?” Or the way he cited analyst earnings projections as justification for stock price gains — right before stocks imploded and those projections proved to be worthless?
And how about Bernanke’s multiple assertions that the subprime and mortgage crises would be “contained?” Or his statements that the once-in-a-lifetime, bubble-icious gains in home prices were nothing to worry about?
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| “We’ve never had a decline in house prices on a nationwide basis.” — Ben Bernanke, July 2005 |
In other words, we have concrete, real world evidence that printing too much money, and keeping interest rates too low, can only TEMPORARILY inflate asset prices. Then those prices inevitably collapse when they can no longer be supported by real world fundamentals!
Yet unbelievably, Bernanke is at it again!
He wants hard-working Americans like you to take your hard-earned funds and plow them into stocks, homes, junk bonds, and other higher-risk investments. Then rather than just let those assets rise and fall in value depending on underlying economic growth, corporate earnings, and so on, he is openly pledging to artificially inflate their value with printed money!
Don’t believe me? Then here is the Chairman himself from his post-meeting press conference on September 13 …
“The tools we have involve affecting financial asset prices … to the extent that home prices begin to rise, consumers will feel wealthier, they’ll feel more disposed to spend … so house prices is one vehicle.
“Stock prices — many people own stocks directly or indirectly … and if people feel that their financial situation is better because their 401(k) looks better or for whatever reason, their house is worth more, they are more willing to go out and spend.”
There it is. In black and white. The Fed is saying it will print money — till Kingdom Come if necessary — until you join the handful of reckless speculators on Wall Street and chase ephemeral gains in the asset markets … gains we’ve already seen evaporate spectacularly twice in the past decade and a half!
The Good News?
Americans Are on to Washington’s Game!
If there’s any good news, it’s that many Americans are on to this charade. Devastated by two epic busts since 2000, they’re not falling for Bernanke’s scheme.
Just look at this Washington Post headline from earlier this week:
“Wary Americans saving more, even as government encourages risk”
The story goes on to note that Americans are socking more money away in savings accounts than at any time since the Fed began tracking the data in 1945.
We’re still not saving enough overall — around 4 percent or so of income. But that’s four times the savings rate in 2005, when the Fed last enabled an epic bubble, that time in housing. An unending string of weekly reports from the Investment Company Institute also show that individual investors are yanking money out of higher risk assets like stocks. Instead, they’re adding money to relatively safer asset classes such as bonds.
Now I’m not to suggesting bonds have no risk. Far from it! Junk bonds feature a healthy dollop of credit risk, while long-term bonds can lose substantial value if interest rates rise.
But cash and bonds are, on the whole, less risky than dot-bomb stocks and Miami Beach condos! So I’m somewhat encouraged that maybe, just maybe, investors won’t be sucked in by Bernanke again.
Personally, I recommend going a step further than just playing defense though. I think you can go on the offense by using broad hedges like inverse ETFs to protect against economic and earnings risk … owning gold bullion as insurance against chaos and money printing … and dabbling only in select, targeted stocks that can prosper no matter what Bernanke cooks up.
That’s what I’m recommending in Safe Money Report. And I’d love to have you on board! For more details, just click here.
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
