Graham Summers: The Bernanke Put is a Lie!

• Let me reassure you that the Bernank will eventually QE to infinity. It will lead to the destruction of the dollar and hyperinflation! The real reason he will do this: it is to save the Illuminist banks. He will QE to infinity to buy up all the toxic worthless crap on banks’ balance sheet like he did in 2008-2009 spending about US$1.3T to buy MBS and other derivatives crap. The Bernanke Put is a lie to me because choosing QE to infinity means the end of the US financial and probably the world’s financial system. Got physical gold yet?
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  The Bernanke Put is a Lie! 
  by Graham Summers , http://gainspainscapital.com/ 
  Now, about that Bernanke Put.
  Many people believe that because Bernanke once talked about dropping money out of helicopters to fight deflation that he literally meant that he would do this if push came to shove. He didn’t. The whole thing was a bluff meant to prop up the markets: the famed Bernanke Put.
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  Truth be told, this bluff is probably the smartest thing Bernanke ever did. By threatening to leave a paperweight on the “print” button, he convinced the market and all of Wall Street that the Fed would always be there to step in and save the day.
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  Let’s say the Fed just hits “print” and prints TRILLIONS of dollars to monetize everything under the sun. If this happens then the bond market will implode taking down the US financial system with it (85% of the $224 trillion in derivatives sitting on US bank balance sheets are related to interest rates).
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  Moreover, it’s not as though “printing” solves a solvency crisis. Instead it results in a loss of faith in the underlying currency, which causes hyperinflation (this is exactly what happened in Weimar). Most people forget that hyperinflation is the SAME as defaulting: in both situations the underlying currency becomes worth much less if not worthless.
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  So printing is ultimately a useless concept. But what about debt monetization? Couldn’t the Fed just print tons of money to buy Treasuries and other debt instruments? The answer here is ALSO a resounding “NO.” The reasons are three-fold:
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  1)   Inflation
  2)   Political consequences
  3)   Draining Treasuries from the banks
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  The last time the Fed instigated QE, food prices went through the roof resulting in riots and civil unrest around the globe. Today, food prices are already soaring due to severe droughts. The Fed’s hands are tied here.
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  If the Fed engages in QE, the political consequences would be severe. QE 2 alone made the Fed front page news in a BAD way, resulting in the Fed going into major damage control mode: op-eds about Bernanke being a regular guy, town hall meetings, etc.
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