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Bill Gross: Why QE Will End Before the Fed Wants It To

By , Money Morning -

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.

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Do We Really Need the Federal Reserve System?

By , Money Morning -

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.

Just listen to Fitz-Gerald's answer in the following interview.

7 Reasons Not to Trust the Bernanke Testimony to Congress

By , Associate Editor, Money Morning • @DavidGZeiler -

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.

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The New Crisis Warning Just Issued to the Federal Reserve

By , Money Morning -

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.
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."

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5 Things the Federal Reserve Hopes You'll Never Find Out

By , Associate Editor, Money Morning • @DavidGZeiler -

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.

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Why We Can't Avoid Ben Bernanke's "Monetary Cliff"

By , Global Investing Specialist, Money Morning -

When it comes to the Federal Reserve, an accurate “reading of the tea leaves” means paying attention to all of the fine print. And while the markets cheered last week's FOMC meeting with yet another rally, a deeper look at Ben Bernanke's press conference left me with a slightly different taste in my mouth.
If you sift through the "Fedspeak," it becomes obvious that the Fed is now lining up a “monetary cliff" that’s bigger than the fiscal one we spent the last half of 2012 worrying about.
Here’s what the Fed has in store for us now...

Do We Really Need the Federal Reserve?

By , Chief Investment Strategist, Money Map Report • @kfgtotalwealth -

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...

The Fed Delivers Unmistakable Message After Two-Day Meeting

By , Contributing Writer, Money Morning -

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."

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