The Fed Prints….and Food, Oil, and Gold Soar….the Dollar Sinks

Well, just as predicted last week, the Fed unleashed another round of money printing, completely unsterilized credit creation, to be used to buy US mortgage securities, driving down 3.5% mortgage rates as if these record low rates weren’t already low enough.

The real surprise was that the printing will be open ended…..it supposedly won’t stop until unemployment falls to an acceptably low level…..however long it takes.

What was the reaction? Well stocks jumped, not surprisingly (due to the surprise of the open-ended printing) but only 1.9%. The Fed believes that this will help lower unemployment.

Although this hasn’t worked so far, higher stock prices are supposed to make folks on Main Street feel wealthier and therefore more inclined to buy stuff, leading businesses to invest more and hire more.

If only most folks on Main Street had big stock portfolios. They don’t. Most of the stock they do own is held in their modest retirement accounts, which by definition, can’t or won’t be spent for decades. So this delusional scheme will not work….yet again.

Meanwhile, the things that most folks on Main Street need to buy is going to jump in price. Grains and other commodities that feed food production were already near record high levels in price—and now they will jump even higher. Oil and gasoline spiked on the news; in fact, gas prices have never been higher in the US during the second week in September. So while incomes will not rise much (because unemployment will not drop very much, if at all), the cost of living will soar. The result? The middle class will get CRUSHED.

Around the world, the impact will be even more grave. Two years ago, rising food and energy prices around the world led to rioting, thousands of deaths, government coups and other forms of social unrest. And since most of these energy and food commodities are priced in dollars, since they are already near record highs, and since families from less developed nations pay a far greater percentage of their incomes for food and energy, the new Bernanke policy will lead to much more global HUNGER, RIOTING, and even DEATH.

Great job Mr. Bernanke! You are destroying the US middle class and will be responsible for the deaths of thousands if not hundreds of thousands of poor folks around the world.

Worse yet, if your policies exert maximum impact, you will likely force nation states to go to war as they compete for the food and energy resources suddenly mad more expensive by you.

Some leaders are already starting to openly question the wisdom of giving so power to a head central banker. The former chancellor of the exchequer in the UK is very concerned that concentrating so much power in the hands of one individual is unwise and even dangerous.

And even the folks with more money, above the squeezed middle classes, seem to be agreeing. How do we know this? Because more and more are flocking to gold. They are starting to sense that holding most of their wealth in dollar denominated financial assets where yield is being paid in a constantly debased fiat currency is becoming too risky.

If the Fed can print, and will print, all the dollars need to satisfy the goals of the Fed’s masters—the banking elites—then had better transfer wealth to a store of value that the Fed cannot print or debase.

Gold is the best example. But silver is another. And so is platinum. Unsurprisingly, all three soared last week. And while the benefits of owning precious metals will likely not accrue to most of the middle class, at least there’s a growing body of people who are rejecting the Fed’s potentially destructive and certainly experimental policies. They’re voting with their feet—getting out of US dollars and getting into precious metals, most often gold.

And unless the Fed discovers a way to print gold, these insightful folks will be protecting themselves and their families from a future crisis that, by the day, is looking like it will be more and more devastating.

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