Exactly 12 hours after we got home from Shanghai, China, I received an urgent email from Mike Larson that will go down in our company’s history as one of the most timely ever. I’ll tell you more about our visit to China in a moment. But first, if you missed Mike’s urgent message, this is your chance to see it before it’s too late. |
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Fed chief Ben Bernanke has just proven what many have suspected all along is indeed true: The U.S. Federal Reserve is patently INSANE!
In reporting on the FOMC meetings, “Helicopter Ben” announced that the Fed is going to do the same old thing and expect better results:
It’s going to hold interest rates near zero as far as the eye can see …
And it’s going to print $40 billion new dollars per month in an attempt to stimulate the economy — $480 billion per year!
In short, it’s doing the same things it has done since 2008 — but expecting a different outcome.
Any way you look at it, that’s the very definition of insanity.
Look: The Fed has already held interest rates near zero percent for four long years, now.
It has already created $1.8 trillion out of thin air through QE I and QE II …
And it has already bought hundreds of billions of dollars more long-term Treasuries as part of Operation Twist 1 and 2.
So what’s the result? No impact whatsoever on the real economy!
Sure — all that free, easy money can temporarily lift the stock market. But despite everything the Fed has done …
Unemployment has stayed over 8% for 42 straight months …
The average family home is still falling in value …
Profits at many major corporations still stink — and they’re getting more rotten almost by the day …
U.S. economic growth is still grinding to a near standstill …
And now, as America approaches the precipice of its great fiscal cliff, the stock market looks for all the world as if it’s a massive bubble about to burst!
Worse, the middle class — the very backbone of the U.S. economy — is getting eaten alive:
Household income is plunging: The U.S. Census Bureau just reported that real median household income has now fallen for the fourth straight year.
Income has fallen so low, in fact, that when you adjust for inflation, the median family has the same income today as it did in 1967 — 45 long years ago!
Typically this kind of increasing disparity in income occurs just before economic calamities — and today, it’s more extreme even than before the 1929 stock-market crash and the Great Depression!
And not only isn’t the Fed helping … its failed efforts to revive the economy are creating a second crisis.
Thanks mostly to the Fed’s past money-printing gambits, in August …
Make no mistake:
The U.S. economy is broken.
Nothing the Fed can do will fix it.
To the contrary: The Fed’s easy money policies created this crisis in the first place by inflating the housing bubble. Now, they’re only making matters worse — doing absolutely nothing for the job market, while driving inflation higher!
And as America’s great Fiscal Cliff approaches — the catastrophe that JPMorgan says will push America “head-first into the fiscal meat grinder” — the storm clouds are darker than ever.
Best wishes,
Mike
Why The Fed Is So Panicked
Now that Mike has given you a crystal clear domestic perspective of the Fed’s actions, consider the global context …
East Asia: We just got back from China, where I spoke at the Shanghai Money Show. My son Anthony, who works in Tokyo, flew in to meet us there.
For two weeks, we talked to experts and residents from all walks of life and many regions of the country.
Crosscurrents are many to be sure, but the bottom line is unmistakable: The world’s second largest economy is slowing dramatically.
China’s electric power usage, a faithful indicator of true economic growth, has virtually flat-lined.
Construction cranes are still everywhere, but a large percentage are motionless, as if frozen in time.
Excess capacity is rampant.
Sales are plunging. Unsold goods are piling up in warehouses.
Meanwhile, Japan, still the world’s third largest economy, is also sinking. Just last week, the government cut its assessment for the second straight month and warned that “growth is pausing” — a euphemism for virtually zero growth.
In July, Japan’s exports slumped the most in six months. Factory output also fell unexpectedly.
And all this is happening despite the same kind of zero-interest-rate, money-printing policy that the Fed says is the solution to our problems in the U.S.!
Western Europe: The latest “Mother of All Rescues” has temporarily soothed nervous investors. But it’s unlikely to make any difference in Europe’s economic decline.
The European Union is little more than a coalition of nations and banks that, like junkies, are now addicted to the drug of free and easy money. Although investors are still getting high with every new “fix,” the Continent is now a gaunt, hollow-eyed shadow of its former self.
Indeed, just hours before the Fed announcement last week, the OECD projected that the euro area’s three largest economies — Germany, France and Italy — will shrink at an annualized rate of 1 percent on average during the third quarter, and at 0.7 percent in the fourth.
Result: Unemployment will surge beyond today’s already high levels.
The United States: Chances of some “grand bargain” in Congress that cancels the looming Fiscal Cliff are now close to zero. As a result, the U.S. economy, already suffering from the global slowdown, is headed for a nearly certain recession in 2013.
Now do you see why the European Central Bank and the U.S. Fed have vowed to print unlimited amounts of money?
They finally see the same disaster that we’ve been warning about for months. But it’s obvious that their insane response will only make the crisis far worse.
Brace yourself for some wild action in the financial markets. And be sure to watch your inbox closely for our daily updates!
Good luck and God bless!
Martin
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.
{ 18 comments }
Back up the truck and buy gold and silver. Its headed to the moon.
Good Luck With That! It’s the first thing “they” will confiscate when the word is out.
Maybe yours not mine .mines in hand no risk mate..
Every time I read one of Mike’s e-mails I feel like grabbing my Glock 17 pistol and shooting myself. …Its OK now, I grabbed my brown paper bag, and have been inhaling and exhaling furiously. ….Whew! I’m back to normal again… thank God!
OK! OK.! …lets try to make some sense of all this stuff…
Has it occurred to you that Ben Bernanke is not insane, but crazy like a fox? That he’s using the threat of inflation to force businesses to invest the trillions of dollars sitting on the sidelines and get the economy moving again?
Bear in mind that Bernanke IS a Republican. The good kind – not one of those nutcases running around that don’t know anything, who are pushing America over the fiscal cliff. He also is a scholar of the Great Depression AND….he was largely responsible for saving America from total and utter collapse back in 2007-2008? Yup. He’s a HERO. They should have had ticker tape parades and be worshiping his every utterance. But according to the insane calculus of American politics he is a traitor. What absolute nonsense! It really does tell you who knows what they are talking about and who is full of horseshit.
The American economy is STALLED and in a funk. Banks, have been bailed out and recapitalized with trillions of dollars at the expense of the taxpayer. They’ve got plenty of money to lend, but rather than lending it out to small businesses as they are supposed to, they’re using the money to speculate like mad in the stock market.
Consumer confidence is down and businesses don’t know what to do. But, f you look at the root causes it has everything to do with the dysfunctional state of America politics.
America still has a free market system that created the strongest most vibrant economy in history. It still has the knowledge and expertise to runs circles around the rest of the world. But there are some serious problems. Its infrastructure is rickety out falling apart. Its education system is appalling bad, its healthcare system is one of the most expensive and inefficient in the world. Its tax system needs to be updated to meet the needs of a 21 century economy.
But all these problems are SOLVABLE. Americans needs to take a good look in the mirror and figure out who they’ve become. For one thing the ultra rich have become ULTRA GREEDY. Their success has distorted their view of reality. For some reason they believe that God has put them on earth to own everything. The only problem with that view of the world, is that without a vibrant middle class there is no economy. Who are American corporations going to sell to if the economy consists of a small group of incredibly rich billionaires and the working poor?
Secondly, American’s need to make changes to the capitalist screed. Profits are necessary for the capitalist system to work effectively, but profits at the expense of everything else is a disaster for the capitalism.
For example, everybody, but the most obtuse Tea Party Republican, knows that CO2 emissions creates Global Warming. And yet we are rushing to civilizations ultimate demise as surely as night turns into day. What makes this unacceptable is that there is a simple economic solution that would solve this dire threat AND solve the debt problem! A simple carbon tax. It uses the capitalist system, to motivate people to solve one of the most intractable problems created by man. A simple solution that is prevented by blind ignorance and party politics.
We know the solutions, but we are destroying our future for short term profits
So rather than worrying about their stock portfolios Americans need to focus on the root of the problem. The political system. Its broken. Fix that and your economy will be fine.
Richard, regarding Bernanke being a hero, isn’t it ironic that President Bush awarded the Freedom Medal to Greenspan just 2-3 years before the collapse. The same Greenspan who opposed bringing financial derivatives to the open market so counterparty risk could be observed? The same Greenspan who destroyed the career of Brooksley Born, chairwoman of the CFTC who proposed regulation of derivatives in ’97 — just a year or two before derivatives (LTCM leveraged Russian bonds) derailed the economy?
Now Bernanke’s ridiculed for coping with the result of Greenspan’s go-go monetary policy (which included holding rates low as the economy overheated). And Greenspan continues to be the recipient of a medal that was cheapened by giving it to him.
Alan Greenspan was a good Fed Chairman at one time, until he started believing his own ideological BS. And Brooksley Born reinforced the fundamental lesson we should all keep in mind as investors. Read widely and think for yourself. But perhaps more important is that no person alive has all the answers. At the time she challenged him, he was deified by Wall Street as a god.
As for destroying reputations, I think the only reputation he really destroyed was his own for being repeatedly warned about the abuses taking place in the financial system and then turning his back on them.
Vote out obummer and the economy will be in better shape
You really think so? If Romney gets in and runs America as badly as he runs his political campaign, then America is in deep $hit.
HEY RICHARD GORDON…………….YOMAMA OBAMA …….hasnt done a thing he promised …..wheres the balanced budget he promised oh wait a minute his 4th yr and still the DEMONCRATS dont have a budget AT ALL…………. what about the national debt he was supposedly going to rid us of ……….OH WAIT HE FORGOT ABOUT THAT TOO our NATIONAL DEBT is now over 60% higher than it was before he took over AND YES LETS NOTS FORGET THAT OBAMA HAS PERSONALLY ALL BY HIS LITTLE STICKMAN SELF HAS ADDED $$$$$$$$$$$$$$$$$$……… ( FIFTY THOUSAND DOLLARS ) in added taxes to every taxpayer in this country……….. yea thanks alot……….. all because of his wasteful spending ………too bad this piece of garbage forget to tell us he cant count .he must have learned how to count in kenya THATS WHY ADDING A TRILLION AND A HALF OR MORE TO THE DEFICIT EACH YEAR SEEMS NORMAL TO HIM………… I SAY FLUSH THE BROWN TURD OBAMA IN 2012 AND RID OUR COUNTRY OF THIS OBAMAINATION
OBAMAINATION- spot on!
Where are the bond viligantes? Egan Jones was the only downgrade. Unless there are consequences, bad fiscal policy will continue. This has been going on for years and yet, the Fed gets away with it. It’s getting to be a broken record.
“No impact on the economy.” Mike’s arguing from the comfort of the financial markets *after* being rescued. We have no idea what the economy would be like without Fed intervention. All we know is that free marketeers like Secretary Paulson (and Bush, who appointed him) intervened. Reading the book “Too Big to Fail,” it’s clear these people believed they were facing total collapse.
I think Mike’s just upset that Bernanke threw a wrench into Mike’s perma-bear forecasts. The stopped-clock phenomenon is going to take longer.
Richard, either your post is a great bit of sarcasm or you are a complete idiot. To begin, the comment about using your Glock on yourself gives me the answer to my first statement. Bernanke has just unleashed unlimited INFLATION on us. Devaluation of the currency through massive unending QE. Do you think Benny runs the FED? Ben is a lackey of the cartel that owns the FED. He’s no hero, he just killed the U.S. Dollar. Do you even read or watch any of the videos here at M&M?
Jim, suggest you take intensive Keynesian therapy ASAP. Also take two aspirins see a psychiatrist quick.
Don’t you guys know that the Fed reserve banks are own by private banks? Every move from the Fed is catered to their cronies , wall st fat cats and the rich.
We must clean the slate ,wipe out all our debts and start all over again by devaluating the dollar 1000 times , stop importing, control prices to keep a lid on inflation.
We must abolish the Fed and ceate a new US central bank.
I agree with you Mike. I see Helicopter Ben like a mad scientist that is working to destroy the world in his lab. He has gone off the deep end. The Fed doesn’t need to be abolished. We just need a new chairman and new board members. Printing money on this scale is only an attempt to white wash our long-term structural problems (massive federal debt, rising welfare state, declinning work ethic).
After I initially commented I clicked the -Notify me when new feedback are added- checkbox and now every time a remark is added I get four emails with the same comment. Is there any approach you can take away me from that service? Thanks!