Legendary bond guru Bill Gross doesn't think too highly of the Federal Reserve and Ben Bernanke's monetary policies.
"There comes a point when no matter how much blood is being pumped through the system as it is now, with zero-based policy rates and global quantitative easing programs, that the blood itself may become anemic, oxygen-starved, or even leukemic, with white blood cells destroying more productive red cell counterparts," Gross writes in his June investment outlook titled Wounded Heart.
Gross believes that QE, which he describes akin to a bad dose of chemotherapy, will end later this year but not because of a suddenly strengthening economy.
the fed history
Do We Really Need the Federal Reserve System?
Abolishing the Federal Reserve System might seem like a drastic idea, but not when you get the full story...
You see, Congress created the U.S. Federal Reserve System to restore public confidence, provide the banking system a source of liquidity that would prevent its collapse and protect the public against inflation.
A century later, the banking system is so big its risks dwarf the Fed's liquidity capacity, and what cost a buck back then now will set you back $21.
That's why we asked Money Morning Chief Investment Strategist Keith Fitz-Gerald to explain how the Federal Reserve System actually helps a country's economy.
Most importantly, we wanted to know if the United States - or any country - even needs the Fed anymore.Read More...
- Why Ben Bernanke's Market Manipulation is So Brilliant Nothing lasts forever. On Wednesday, Ben Bernanke threatened to take away the punch bowl. Shah Gilani explains the real story behind the move. Read more... Read More...
7 Reasons Not to Trust the Bernanke Testimony to Congress
As usual, the markets were hanging on every word of the Bernanke testimony to Congress today (Wednesday).
By now, everyone should know better.
In the years that U.S. Federal Reserve Chairman Ben Bernanke has been a member of the Fed - both as a member of the Board of Governors from 2002 to 2005, and in his two terms as chairman beginning in 2006 - he has been stupendously wrong time and time again.
Bernanke gave the markets what they wanted by hinting that his monetary easing policies won't change any time soon, pushing both the Dow Jones Industrial Average and the Standard & Poor's 500 Index up more than 0.5% in midday trading.Read More...
- What You Absolutely Need to Know About Money (Part 8) Shah Gilani explains how the "extend and pretend" game became an institutionalized national treasure... Read more... Read More...
- What You Absolutely Need to Know About Money (Part 7) By the start of the 1960s, banking in America was in a state of flux. And as Shah Gilani explains it got ugly fast. Read more... Read More...
The New Crisis Warning Just Issued to the Federal Reserve
Before the housing market crash, economists warned that record low-interest and mortgage rates were fueling a housing bubble.
Unfortunately, those fears were both overlooked and underestimated.
Now, an advisory council to the U.S. Federal Reserve is warning the Fed that its record $85 billon-a-month stimulus and ultra-low interest rates are fueling new bubbles in student loans and farmland.
"Recent growth in student-loan debt, to nearly $1 trillion, now exceeds credit-card outstandings and has parallels to the housing crisis," according to minutes of the council's Feb. 8 meeting.Read More...
In addition, "agricultural land prices are veering further from what makes sense," the council said. "Members believe the run-up in agriculture land prices is a bubble resulting from persistently low interest rates."
5 Things the Federal Reserve Hopes You'll Never Find Out
Most Americans assume the U.S. Federal Reserve is a powerful government institution that seeks only to safeguard the dollar, boost the economy and drive employment higher.
That's what the Fed wants you to think.
The illusion of the Fed as a stabilizing, positive government entity has more or less existed since its creation under dubious circumstances in 1913.
"It not only avoided the word bank, it cleverly implied federal, or government, control over the establishment of a pool of reserves that would backstop the new banking 'system,'" said Money Morning Capital Wave Strategist Shah Gilani.Read More...
David Stockman: Thanks to the Fed, We're in "Monetary Fantasyland"
David Stockman, who served as budget director under President Ronald Reagan, is taking aim at a favorite target: the U.S. Federal Reserve.
Stockman minced no words in a Monday interview on FOX Business' "Varney & Co."
Speaking of the Fed, he told host Stuart Varney, "They have violated every rule of sound money that's ever existed. They've got the money market rates at zero. They have managed and rigged the entire yield curve so nothing is real out there. It's all trading against the Fed."
He said speculators will continue to invest as long as the Fed can hold the bond price up and the yield down "and keep shoveling out free overnight money."
"We're in a monetary fantasyland," Stockman said.Read More...
- Why Crime Pays for "Too-Big-To-Fail" Banks U.S. banks will pay more than $100 billion in fines due to acts that caused the financial crisis. Think that bothers them? Shah Gilani explains why it's just business as usual… Read More...
Do We Really Need the Federal Reserve?
Last week I spent two days speaking to senior government officials and business leaders in Bermuda, which is one of the world’s leading international insurance and reinsurance hubs. The men and women in the room are responsible for hundreds of millions in assets worldwide.
As I was finishing up, I received one of the most provocative questions I’ve gotten in a long time:
"Does any nation really need a 'Fed'?"
Here is my unequivocal answer... Read More...
What You Absolutely Need to Know About Money (Part Three)
From Venetian goldsmiths issuing paper receipts, to America's first and second central banks - the Bank of North America in 1781, and the First Bank of the United States in 1791 - we arrive at the year 1836.
Chapter Two, on the beginnings of central banking, ended with: "The Second Bank (of the United States, chartered in 1817) was bitterly opposed by President Andrew Jackson, who made the existence of the Bank, and its power over the people, a central issue in his campaign... Jackson won, and in 1836 the Second Bank of the United States' charter expired, along with another central banking experiment."
So, why did Andrew Jackson, after a successful first term as President of the United States, bet a second term on breaking up the huge, monumentally successful bank?
John Meacham's biography of Andrew Jackson, American Lion, lays bare the General's very Jeffersonian fear of the power and influence of banking interests.
Jackson exercised his veto power when a bill for the Bank's recharter passed the Senate and (narrowly) the House, after a former recharter opponent, Samuel Pierce Carson, "had obtained a loan of $20,000 from the Bank, and had changed his opinion."
Jackson eventually overcame the Bank's arsenal of loans and favors by appealing directly to the voters.Read More...
The Fed Delivers Unmistakable Message After Two-Day Meeting
The Fed delivered a clear message Wednesday after its two-day meeting: Don't expect the easy monetary policies to end anytime soon.
The Central Bank's official policy statement, the first of 2013, said interest rates would remain near zero, at ¼%, and the aggressive $85 billion-a-month bond-buying program would continue for a "considerable time."
Word of the Fed's decision came just hours after a Commerce Department report showed gross domestic product had declined for the first time since the Great Recession, slipping 0.1% in the fourth quarter.
The GDP's first decline in 3 1/2 years had led economists to predict the Fed would stick to its easy money policies for the time being.
"There is no hint that they are giving any thought of backing off current policy and their current stance," Wells Fargo's senior economist Mark Vitner told Bloomberg.
"Growth has slowed and inflation is running below expectations. To the extent the Fed's decisions are data dependent, all the relevant data suggest they should continue to ease."Read More...
Did the Fed Just Admit QE3 Has Been a Major Failure?
After four years of quantitative easing programs, including QE3 just last fall, U.S. Federal Reserve officials have started voicing doubts about its effectiveness and concerns that it is distorting the markets.
And it's not just the Fed's hawks, such as Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, speaking out against the bond-buying extravaganza.
Doves like Atlanta's Dennis Lockhart and moderates like Kansas City's Esther George have expressed concerns about QE3 as well.
"I do think the growth of the Fed's balance sheet could have longer-term consequences that are worrisome. While I've supported these policy decisions to date, I acknowledge legitimate concerns," Lockhart said in a speech in Atlanta on Monday.
According to the minutes of the December Federal Open Market Committee (FOMC) meeting, several members "thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet."
If in fact sentiment within the FOMC is turning against QE3, then the easy money spigot that has helped fuel the stock market and other investments could be switched off sooner than most expected, which could have a sharp impact on the markets.Read More...
What You Probably Don't Know About The Federal Reserve and Why It's So Dangerous
The Federal Reserve System is a government-sanctioned private enterprise that functions as a socialist tool.
It was conceived in 1910 and constructed for the benefit of the private bankers who control it. Congress blessed the scheme in 1913 with passage of the Federal Reserve Act.
These days the Fed doesn't just backstop America's too-big-to-fail banks. It has expanded its doctrine of socializing banking losses globally.
The Fed helped bail out private businesses, foreign big banks and central banks in Europe and Japan in the credit crisis of 2008 and is the model for the European Central Bank, as well as the ECB's primary backstop.
To understand how the Fed gets taxpayers around the world to pay the losses its member banks routinely incur, let's pull back the curtain on the Fed and explain how it operates.
Here's What the Fed Really DoesBanks lend money and sometimes they don't get paid back. That's not a problem if it doesn't happen too often and if profits from other loans and investments cover the loan losses.
But since banks have gotten really big and have to make big loans (due to economies of scale and return on capital expectations) they need big borrowers. There are no bigger borrowers on the planet than governments, and that's where a lot of banks are lending.
Of course, governments aren't immune to over-borrowing and insolvency.
All the big banks that lent to banks in countries now in financial straits continue to lend to them because if they don't they won't get paid back what they are owed. Banks would fail from a cascade of losses and would either have to be bailed out or shut down.
That's where the Federal Reserve comes in.
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The Federal Reserve's Magic Act is Destroying America
When it comes to the Federal Reserve, it's not a matter of what you see is what you get. It's more a matter of what you don't see is what you'll end up getting.
Getting, as in up the you-know-what!
I'm talking about getting socialism shoved up our capitalist backsides, for one thing.
It's simple: We are about to go over the so-called fiscal cliff. Why? Because Congress can't figure out how to stop spending money it doesn't have.
Forget the whole revenue side of the equation. It's only part of the mix of fixes, and the only fix that matters ain't fixed.
Stop spending money you don't have and you don't have to tax people more to pay for a bunch of crap they don't need, don't want, and don't even know they're getting.
Oh, that would be because on top of what we are getting there's even more that we're not getting.
Congress' paymasters are getting pork and beans for whatever they want because that's how our Congress gets elected, by greasing the wheels of insiders to get taxpayer money for their private purses, enough to plentifully pay for campaigns.
But that's only the "private" side of spending.
The spending scheme has mushroomed by expanding (and paying sickeningly outrageous wages and benefits) an ever-growing number of government workers.
And by expanding entitlements beyond what we are entitled to. And by expanding welfare and "social programs."
Yes, I am including 99 weeks of unemployment, and accompanying food stamps, and free money for unwed mothers to have more kids so they can collect more free money, and free day care, and all the other free stuff that ain't free if someone (that's you and me) is paying for it.
All that spending creates a class of people, a voting class. And, guess what they vote for?
Duh, that would be more free stuff.
So what's this got to do with the Fed?
I'm glad you asked...
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