- Jim Willie: The USFed And A Return To Infinite QE Forever At Zero Bound
by Jim Willie, Golden-Jackass, via https://www.silverdoctors.com/
As the USFed climbs into the Infinite QE Forever policy chamber, the entire global financial system will abruptly change…
The widespread profound and recognized global recession, complete with numerous icon corporate failures, will lead the US Federal Reserve to return to unlimited Quantitative Easing with a Zero Percent chaser. The Jackass calls it a return to Infinite QE Forever at the Zero Bound. Not only is the double step of return to QE with a sequence of interest rate cuts urgently necessary, but the financial markets are demanding it. In fact, they are holding the USFed hostage, as the venerable august body is backed into a policy corner. This time seems different. For ten years, the USFed has relied upon coordinated policy with the Euro Central Bank, having used all the most extreme measures, yet has a systemic failure on its hands. Witness extreme monetary policy failure. The systemic failure is both financial and economic. The bond purchase program wrecked the bond market by driving away legitimate investors, while the ultra-low interest rates wrecked the economy by distorting asset allocation. The central bank is backed into a corner like never before. Their tightening procedure over the last three years is a monumental dismal failure. They cannot return to normalcy. In fact, quite the opposite. They must resort to permanent hyper monetary inflation. They must return to Infinite QE Forever. They must also move the interest rate toward the zero bound. Who knows? If they charge a small fee with negative bond yields in dozens of nations for sovereign bonds, maybe these master idiots at the controls will pay us to borrow money. They urgently need the participants within the economy to get busy, to conduct business, and to pay taxes.
The firm Jackass belief is that for every dollar (100 cents) offered in new debt, the economy gains around 20 to 30 cents of new business activity. The primary effect of the last several years has been to avert a USGovt debt default and to pump a grand stock market rally despite the worst recession since the Great Depression. Of course, the dutiful government stat-rats lie though their keyboards (teeth) about the GDP growth, about the price inflation, and about the jobless rate. For about 10 consecutive years, the GDP has been running at around minus 3% to minus 5% in a vicious ongoing recession. They lie on price inflation by about 5% at least on a constant basis. The bond market crisis has begun, and it will develop into full blossom. The USFed must act, to add bond purchases and to cut interest rates. But these policies are exactly what caused the problems. They have two choices: to permit the system to collapse, or to buy a couple more years with more continued levitation. The Wiley Coyote moment is here, and offering some hydrogen balloons to the mangey animal is the only option. This bond market crisis is upon us. It is what the Jackass has called the Systemic Lehman Crisis, certain to be at least three times worse than in 2008. All the subprime bond errors have been repeated on a global scale. The USTreasury Bond is the new global subprime bond. It is being rejected.