After nearly 100 years of manipulating and fixing the cost of money, the Federal Reserve is now threatened with the prospect of a groundswell revolution by the people against its privileged role as the alleged institution of providing the world’s banks stability as well as the savior from occasional Black Swan bank runs and collapses. Sign-up for my 100% FREE Alerts
That nonsense, that central banks offer financial stability, has been debunked ad nauseam by many who know a thing or two about the inherent evils of central banking, including G. Edward Griffin, Lew Rockwell and Congressman Ron Paul, three men of many more who serve as today’s teachers of the nature of money and credit. For decades, these men have warned us of central bank power and the reasoning behind the clauses of the Constitution regarding the nation’s money. Few listened.
However, for the first time since its inception in 1913, the majority of Americans now know that the Fed is not really a government agency or department of the federal government, at all, and that the Fed, itself, contributes to banking instability and the disparity of wealth. Today, many listen to a tale of deceit, treachery and even treason behind the Federal Reserve Act of 1913.
Here’s the problem for the Fed: After two rounds of so-called ‘quantitative easing’ and soaring food and energy prices as a result soon after, how does the Fed survive, politically, as it prepares for even greater amounts of money printing required to re-inflate the burst Ponzi scheme?
“ . . . we need to consider that the Fed is now so politically toxic that Ben Bernanke is literally going on the campaign trail to attempt to convince the American people that the Fed is an honest and helpful organization,” Phoenix Capital Research’s Graham Summers penned in a recent essay for GoldSeek.com. “Put another way, there is NO CHANCE the Fed can announce a large-scale monetary policy unless a massive crisis hits and stocks fall at least 15%.”
Gloom Boom Doom Report editor and publisher Marc Faber agrees with Summers’ assessment of the colossal size of the Fed’s next round of QE planned for this year. In previous interviews, he, too, has outlined the political dilemma facing the Fed.
“It [QE3] would have to be very significant to boost all asset prices including homes, stocks, bonds and commodities…Much larger [than QE1 and QE2],” Faber told CNBC, Monday, in response to a question asking for his outlook for more Fed intervention.
Back to Summers. “ . . . if the Fed were to announce a new policy it would have to be MASSIVE, as in more than $2 trillion in scope,” he added. “Remember, the $600 billion spent during QE 2 barely bought three months of improved economic data in the US and that was a pre-emptive move by the Fed (the system wasn’t collapsing at the time).”
As far as the palliative effects to the economy during the Fed’s previous two QEs, Summers stated they were negligible. But the $600 billion QE2 program did bring on some serious food and energy price increases, instead. In fact, the Fed (as well as other central banks which followed the Fed in money printing) created enough consumer price inflation to trigger civil unrest in Tunisia, Egypt, Libya and a dozen other nations across the globe, including the US with its OWS movement.
So, during an election year, the Fed simultaneously must engage in QE3 to prevent a collapse of the US Treasury market while at the same time contain commodities prices from rising too high. A Fed failure could easily take Obama down in a George H. W. Bush-esque second-term attempt fiasco of 1992, as well as drive the final nail in the coffin of the Fed, gladly delivered by a legion of Congressman Ron Paul supporters and others hostile to Bernanke and his colleagues.
“This is an election year. And I’m so sorry to say this Jim, but I expect somewhere down the road we’re going to see some type of drop in energy prices,” Brian Pretti, Managing Editor at ContraryInvestor.com, told Financial Sense Newshour, Tuesday. “How that’s engineered, how that comes to pass, I really don’t know.” [emphasis added]
Pretti goes on to say that the previous attempts to jawbone commodities prices down, especially within the energy markets, have failed, including Saudi press conferences which were orchestrated to collapse prices at the behest of the White House and the Fed. The oil market has simply ignored the The House of Saud’s gesture, according to him.
And Pretti isn’t the only one who notices the tightrope the Fed must navigate from now until November—as well as going forward after the election. The Fed may even come under more attack after the election.
“Washington has urged ally Saudi Arabia to cover potential shortages when new U.S. and European Union sanctions are expected to reduce Iranian oil exports from July,” Matthew Robinson and Jonathan Sau of International Movement for a Just World wrote in a report. “The Obama administration has considered releasing strategic oil inventories, potentially as part of a bilateral deal with Britain.”
News of that bilateral agreement between the US and the UK failed to drop oil prices significantly. The markets aren’t buying what the politicians are selling. WTI Crude still trades above $100 without an announcement by the Fed regarding a QE3. Though Pretti is convinced a QE3 announcement is on the way in time for the 2012 presidential election, but not if it means higher oil prices from today’s elevated levels.
“You know Mr. Bernanke is sitting on the advisory board of Mr. Gross and friends down at PIMCO,” Pretti said. “You know, Bill came out a little while ago and said we’re going to see the FOMC announce [QE3] in the April meeting. And I said, you know, you’ve got to be kidding me—not at oil at a $100 and change and Brent even higher.”
Within that context, then, how does Bernanke print what is estimated to be $2 trillion more dollars to service the grand Ponzi scheme under threat of collapse, while at the same time deliver somewhat reasonable commodities prices going into the political season?
Some ‘shock and awe’ event to knock down commodities prices must be in the works to accommodate the Fed’s next QE announcement. It’s unlikely Obama can win in November with oil prices at $150+ and gold at $2,100, and moving higher, while the Fed props up the US Treasury market with a colossal expansion of its balance sheet and soaring commodities prices.
Somehow the Fed must look like a hero by saving the economy, again, if it’s possible to replay another Lehman and get the credit for saving the global financial system. But what will be the ‘shock and awe’ event that could provide cover for the Fed? Sign-up for my 100% FREE Alerts