The Federal Reserve is creating a massive amount of money out of thin air and injecting it into the economy. Pretty much everybody believes this is the only choice given the economic emergency we face. But we’re told once the emergency is over, the Fed will take the excesses away. In his podcast, Peter Schiff explains why this will never happen. Once the drug addict is hooked, you can’t just take the drug away.
Peter started the podcast saying he thinks the bear market relief rally is coming to an end.
The Fed can only buy so much with its QE and rate cuts.”
The stock market rally in April created a lot of optimism about the economy. The prevailing mindset was “if we can turn it off, we can turn it back on.” Peter said now that the fog is starting to lift a bit, people are starting to realize that narrative wasn’t true and that this is going to be a much deeper and protracted recession.
But people still don’t realize just how weak the economy was before the coronavirus pandemic. Now the government and the Federal Reserve are engaging in the same policies that undermined the economy in the first place.
Pundits and analysts keep talking about how the Fed is “injecting liquidity into the economy.” That translates to inflation. The Fed is creating money out of thin air and spending it into circulation.
But that does not help the economy. It’s never helped the economy. What it does do is help to sustain a bubble.”
During a recent interview, Fed Vice Chair Richard Clarida talked about how the Fed is supporting the economy through this pandemic. How does a central bank “support an economy?” Peter said it really can’t.
What can the Fed actually do? Just print money, right? That’s all they can do. They can artificially suppress interest rates so that we can take on more debt, and they can create money. They can rob people of their purchasing power through inflation and allow the government to spend that stolen purchasing power into the economy. But does that help the economy? No. The Fed has no tools to support the economy. You don’t support the economy by printing money. Now, the Fed could try to support the bubble. It can try to prevent the bubble from deflating or have it deflate more slowly. But that’s actually hurting the real economy.”
In a nutshell, by enabling the government to borrow and spend even more money, by monetizing the massive debt, the Fed is hurting the economy over the long-term. Peter said that there’s a lot the Fed can do to undermine the economy, but there’s nothing it can do to support the economy other than extracting themselves from interfering.
They have to undo the damage they’ve done. They have to allow interest rates to go up. They have to stop monetizing debt. That would help the economy only because they stopped hurting it. That’s what they could do to help — stop hurting!”
During that same interview, Clarida also claimed that the Fed would withdraw and remove all of the excesses it’s injecting into the economy. We’ve heard that promise before. When the Fed launched quantitative easing early in the 2008 financial crisis, Ben Bernanke told Congress it was temporary. He insisted the central bank was not monetizing the debt. He swore that the Fed would sell all of the bonds it was adding to the balance sheet.
It never happened.
Isn’t that the same BS line they fed us after the 2008 financial crisis? QE was a temporary emergency. They were going to eliminate it or unwind it as soon as the emergency was over. They weren’t monetizing the debt. It was all temporary. They were going to normalize rates, shrink the balance sheet. That’s what they said before. It was a lie before. I knew it was a lie before. I told everybody that would listen that the Fed was lying.”
Source: SchiffGold
No comments:
Post a Comment