Cry havoc, and let slip the printing presses of doom [update 2]
So, the US Federal Reserve Bank’s Ben Bernanke announces he’s going to print money – another $300 billion to add to the doubling of the money supply they’ve effected over the last few months. That’s another $300 billion to add to that enormous, and historic, spike you see here:
Can anyone spell hyperinflation?
Meanwhile, straight after that news, gold prices take a jump. . .
You think by any chance these things might be connected?
You remember ‘Helicopter’ Bernanke saying back in 2002 “The US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes...” ?
He meant it.
UPDATE 1: Notice, by the way, that when central banks hyperinflate their currency they like to do it in concert, as Bernard Hickey notes:
The US Federal Reserve has announced plans to buy back US$300 billion worth of Treasury bonds and to lend an extra US$750 billion in its Term Asset Backed Securities Loan Facility (TALF) to kick start car loans, student loans and mortgage lending.
The Bank of Japan also announced plans overnight to buy up to US$18.3 billion a month of Japanese government bonds. The Bank of England has already started its gilt-buying programme.
This is money printing on a grand scale that threatens to create a “very nasty” inflation problem in a year or two, according to Alan Bollard last week in his parliamentary appearance after he cut the Official Cash Rate by a less-than-expected 50 bps to 3%.
UPDATE 2: Of course, the $300 billion of banknotes roaring off the presses to buy bonds will be accompanied by another $700 billion of electronic counterfeit capital to buy mortgage securities, making a grand total (to use arithmetic even Ben Bernanke could understand) of over $1 trillion of pumped into the “financial system.”
Naturally, most commentators have noted only the “surprise and enthusiasm” of the holders of bonds and mortgage securities, as if they’d be a reliable standard by which to judge the wisdom of a move that basically sees them winning the Government’s lottery, at the expense of savers and creditors and everyone whose dollars in their pocket have just been diluted by nearly a third.
You’d think that this avalanche of unbacked paper money and the smiles of those in whose hands its being put would cause even the braindead commentators who pass for economic experts today would notice that this might give them cause to reconsider their notions about the non-neutrality of money?