Thursday, January 27, 2011

By Unanimous Vote, FOMC Intent On Driving The Dollar Off The Cliff

So yesterday, the Federal Reserve Open Market Committee met—with its new makeup, including the two alleged critics of the Quantitative Easing 2 policy, Charles Plosser and Richard Fisher—

—and promptly endorsed by unaminous vote the continuation of QE-2, under the rationale of “promoting a stronger pace of economic recovery.”

More QE-2 steaming our way.
That Lira fellow (nothing to do with us elves at The Hourly G) wrote a long detailed piece, discussing each of the FOMC members, highlighting the two “opponents” of QE-2, Plosser and Fisher.

Are Plosser & Fisher bidding their time? Are they siding with The Bernank in this first meeting of the FOMC, so that later their dissent when QE-3 comes to a vote is louder and has more resonance?

Or are they mealy-mouthed Obama Obfuscators, saying the grand and daring in public, then doing the timid and bathetic when it becomes time to decide?


One does have to consider that, were it not for QE-2, the Treasury would be unable to fund the Federal government. if the Treasury didn’t have access to those $600 billion the Fed is printing out of thin air, the price of Treasury bonds would collapse—the dollar itself might collapse. The monetization that the Fed is carrying out is now a necessary fix—a lot like a heroin addiction. And as everyone knows, you don’t go cutting off a junkie in the middle of getting his fix—he might die if you cut him off.

So maybe Plosser & Fisher recognize this?

Or maybe . . .

Hmm . . .

Fuckit: The Hourly G has $500 bucks says Plosser and Fisher—regardless of their public statements—will vote with The Bernank in favor of QE-3 (or an indefinite extension of QE-2), when the time comes this coming summer.

Any takers?


  1. I'm sure they will continue QE-X for as long as necessary. Somebody has to build the engines for the airplane of the economy.


  2. I would bet my left gonad that all FOMC members vote for QE2 3 4...there will be no 5!!

    They are hedging their comments strategically for if and when it all goes wrong, only then will they say we had our suspicions, but were unable to do anything about it.
    Interesting to note that a $400B is being cut over the next 10 years, so why would Obama even waste his breath talking about reducing the deficit by $400 billion over the next decade, when the Federal Reserve is creating $600 billion in monetary inflation over a period of just eight months, again it’s all bullshit that the average American fails to realize.

    One thing was very clear from the SOTU, and that is OB is not serious about cutting spending and nobody in Washington has any expectation of the U.S. ever returning to a balanced budget.

  3. As Jim Sinclair stated: "It will be QE to infinity".
    What is amazing is that the US public just doesn't get it: the dollar is going to collapse.
    Incidentally, your wardrobe for the flation debate makes you look like a nerd. Change back to your "guayabera" and arrogant pose.

  4. Is that $500 US dollars? Paid in say late 2011?

    Even if I won, what good would those do me then?

    G my man - you could wager $5 million USD and as long as you only pay out in say ...2012, then you risk nothing more than a single lonely Real.

  5. A relative of mine has to take steroids on a regular basis because of brain swelling. The doctors have no cure, but assure her that she might live a long (and reasonably satisfying) life, if they can administer the steroids at *exactly* the right level.

    Even with expert medical care, the balancing act has been very difficult. The steroids are both saving her life and making life miserable (because of various flare-ups of other organs, some of which are potentially life-threatening).

    The Fed situation is very similar. I think Bernanke goes to bed every night praying that the world doesn't slip into a deflationary spiral. He knows that QE has the potential to be very bad (like steroids), but he is attempting to balance that against the potential of a deflationary death spiral (no steroids).

    In no way do I support what Bernanke & co. are doing, but the above 'life and death' balancing act is possibly going through his head.

    No one has ever been in Bernanke's situation before - NEVER! Since this is his first time on a 'tight-rope', it is almost guaranteed that ultimately his strategy will fail.

    The US will at some point fall off the tight-rope and lose its battle for survival. Too much QE would cause hyperinflation; not enough QE would bring on a massive world deflation.

    The FOMC should refuse any further QE and then sternly rebuke the government for not addressing the problem from the fiscal side.

    At this point I think it is impossible to prevent a worldwide depression. On our way there, we just can't be certain if the US dollar will burn up in hyperinflation, or we'll just default on the US debt and enter 3rd world status.

    Note: I previously closed my anonymous comments with "-Dave". Since these blogs are growing, I choose to be more distinctive.

    -Dave in MO

  6. Dave in MO:
    Bernanke is counterfeiting US dollars. This is plain and simple theft. It is allowing the other thieves, "US politicians", to rob the US taxpayers. It will end up in hyperinflation and the collapse of the US dollar.
    Many central bankers and many countries have been in Bernanke's shoes. For example, Argentina, Brazil, France, Poland, Germany, ... This is because Fiat money allows central bankers to print all the money that they want, which leads to hyperinflation.
    I'm sorry about your relative and I pray that he/she will recover.

  7. Doug (first comment above): you state "I'm sure they will continue QE-X for as long as necessary. Somebody has to build the engines for the airplane of the economy"

    Remember those old, cheap toy airplanes that you would play with as a kid, the kind that had little rubber bands to "wind-up" the propeller? That's what kind of engines these clowns are building for the U.S. economy with their destructive QE.

  8. Ebag,

    I mostly agree with what you say. Personally I think that hyperinflation is the more likely outcome because Bernanke is more likely to err on the side of inflation.

    If, however, QE stops in June and the Fed decides to only continue QE-lite, the US economy might actually recover.

    Remember the Flash Crash of May 6th!!!

    Hyperinflation can happen in ONE HOUR because of the coming electronic trading of bonds (mandated by the Dodd/Frank bill).

    Thank you for your prayer for her recovery.

    -Dave in MO

  9. Great content and comments but please switch to an RSS Feeder friendly blog format. Thanks!


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