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The Fed's Exit Strategy Is All Talk And Pure Myth

Published: September 23, 2013
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Source: Lee Rogers, Blacklisted News

Last week’s highly anticipated announcement from the Federal Reserve was no surprise to myself and others outside of the mainstream corporate media. The Fed announced that they would not be scaling back their program of $85 billion in monthly asset purchases. This is despite the fact that in the weeks leading up to their announcement the general consensus on CNBC and other mainstream news channels was that the Fed was going to begin tapering these purchases. Many predicted that they would be reducing their asset purchases anywhere from $10 to $15 billion. This Fed announcement caught the corporate media propagandists completely off guard and made the vast majority of these people look incredibly stupid in the process. It is painfully obvious and should be even more so to people who follow the markets for a living that the U.S. economy is completely reliant upon the Fed’s asset purchases which are artificially propping up the bond and stock markets. All of this talk about the Fed having an exit strategy is nothing more than propaganda. The only exit strategy they have is to talk about the possibility that they will taper or end their asset purchases.

For years the Fed has talked about having an exit strategy but has done nothing substantive to reverse their low interest rate policies or debt purchases. They are in a box because if they end these policies yields on U.S. Treasury bonds will skyrocket and the U.S. government will no longer be able to service its enormous debt burden. Although this would allow the market to reset itself from all of the Fed created imbalances this is viewed as being politically impossible. On the other hand if they continue down this path of endless monetary stimulus the U.S. Dollar will be devalued into worthlessness. The Fed simply creates billions of Dollars out of thin air to purchase these assets. With more Dollars in existence it effectively makes each Dollar less valuable.

At some point the Fed will actually be forced to expand their asset purchases since real demand for U.S. Treasury bonds is in the toilet. China and Japan which are two of the largest foreign holders of U.S. debt are attempting to scale back their holdings. The same can be said about other foreign countries which are diversifying out of U.S. related debt instruments. This leaves the Fed as the only entity generating any demand for these bonds and this demand is completely artificial. This may prevent interest rates from going higher in the short term but in the long term the Fed will have devalued the Dollar to such an extent that nobody will want to hold Dollars let alone debt instruments denominated in Dollars.

Shortly after the Fed’s announcement the gold and silver markets reacted strongly to the upside. The Fed and other Western banking powers have for years sought to suppress the price of gold and silver to hide the fact that inflation is vastly understated in their bogus CPI numbers. With this in mind, Thursday’s spike in the gold and silver prices was not something that would have been welcomed by the Fed. This is why James Bullard the President of the St. Louis Federal Reserve went on Bloomberg radio the day after to claim that the Fed would probably taper in October. If the Fed didn’t taper now when most of the broader market was expecting a reduction in bond purchases, why would they decide to taper next month? Will a whole lot really change over the next month to warrant a shift in policy?

Even more ridiculous is the fact that he had the nerve to say that the recent decision not to taper was close. Perhaps he forgot that the Fed voted by a tally of 9 to 1 in favor of not tapering. That is not what anyone in their right mind would call a close decision. Clearly common sense and logic is not something the Fed likes to include in their propaganda announcements. With these comments this Bullard clown should take the last three letters of his name and replace them with a four letter word that starts with “S” and ends in “T”.

Following Bullard’s comments the gold and silver prices gave up much of Thursday’s gains. It could be argued that a significant portion of the general market actually bought the ridiculous Fed propaganda which helped contribute to the selloff. Most likely however is that Bullard’s comments were cover for another orchestrated take down in the gold and silver markets.

At this point it should be painfully obvious that the Fed cannot scale back their bond purchases. In fact they will eventually have to increase them in order to maintain the short term status quo. It is the only course of action that is politically viable for these vultures. Janet Yellen who is widely expected to be the next leader of the Fed will no doubt continue these insane policies. This is a woman who like outgoing Fed Chairman Ben Bernanke has spent most of her adult existence in academia or with the Fed so her understanding of real world economics is virtually nil. She’s even made statements advocating negative interest rates, continued money printing and other madness so she’s the perfect choice to continue this on-going debacle. It is shocking to see that the system has even lasted this long but at some point this whole experiment is going to end horribly. We will unfortunately witness one of the ugliest economic collapses the world has ever seen and the longer these policies continue the worse it will be.

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