|Just the mere suggestion that this round of quantitative easing will eventually end if the economy improves is enough to severely rattle Wall Street. U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the “smack” away. When that day comes, will the largest bond bubble in the history of the world burst? Will interest rates rise dramatically? Will it throw the U.S. economy into another deep recession? Can the Fed fix this mess without it totally blowing up?
So writes Michael Snyder (http://theeconomiccollapseblog.com) in edited excerpts from his original article* entitled The Financial Markets Freak Out When The Fed Hints That It May Slow Down The Injections.
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Snyder goes on to say in further edited excerpts:
U.S. financial markets are exhibiting the classic behavior patterns of an addict. Just a hint that the Fed may start slowing down the flow of the “juice” …[and] the financial markets throw an epic temper tantrum. In fact, one CNN article…suggests that the markets “freaked out” when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves.
Please note that Bernanke did not announce that the money printing would actually slow down any time soon. He just said that it may be “appropriate to moderate the pace of purchases later this year” if the economy is looking good. For now, the Fed is going to continue wildly printing money and injecting it into the financial markets – so nothing has actually changed yet.
Judging by what happened on Wednesday and Thursday, the end of Fed bond buying is not going to go well….If the markets react like this when the Fed doesn’t even do anything, what are they going to do when the Fed actually starts cutting back the monetary injections?…[It is] on days like this [that] it is easy to see who has the most influence over the U.S. economy. The financial world literally hangs on every word that comes out of the mouth of Federal Reserve Chairman Ben Bernanke. The same cannot be said about Barack Obama or anyone else.
The central planners over at the Federal Reserve are at the very heart of what is wrong with our economy and our financial system. If you doubt this, please see this article: “11 Reasons Why The Federal Reserve Should Be Abolished“. Bernanke knows that the actions that the Fed has taken in recent years have grossly distorted our financial system, and he is concerned about what is going to happen when the Fed starts removing those emergency measures.
Unfortunately, we can’t send the U.S. financial system off to rehab at a clinic somewhere. The entire world is going to watch as our financial markets go through withdrawal.
The Fed has purposely inflated a massive financial bubble, and now it is trying to figure out what to do about it. Can the Fed fix this mess without it totally blowing up?
Unfortunately, most severe addictions never end well. In a recent article, Charles Hugh Smith described the predicament that the Fed is currently facing quite eloquently:
“One of the enduring analogies of the Federal Reserve’s quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)
You know the key self-delusion of all addiction: “I can stop any time I want.” This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses, but Ben, the pusher of QE money, knows his addict–the stock market–will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.
You’re dreaming, Ben–your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.”
We are rapidly approaching a turning point. We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money and the Fed is desperately hoping that it can find a way to engineer some sort of a soft landing…[and] avoid a repeat of the financial crisis of 2008. Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time. Do you believe him?
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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