Define Quantitative Easing Mr. Bernanke

Pinnacle Digest writes: What is the purpose of Bernanke's Quantitative Easing programs? Is it to create jobs or to create spending? An unintended consequence to consumer spending is job creation, but in the Fed’s mind, could it be possible that asset values are what matters most? Is the Fed’s goal to scare people into the mindset that asset prices will continue to rise (which creates wealth) and that we all must rush into our next purchase or investment? Isn’t this what creates inflation after all?

In this article linked below, Chris Ciovacco points to a specific quote from Bernanke back in 2002, before he was Chairman of the Federal Reserve. Below is an excerpt from this telling quote:

“We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

Chris, along with our team at Pinnacle, strongly believe the Fed’s goal is to inflate asset values and debase the value of the dollar as an escape from debt. However, with the current debt issues in Europe, deflationary forces are at work. A debt write-down, as was the case with much of Greece’s debt, is in fact, deflationary.

Chris points to the fact that confidence in the Fed’s (and other central banks) ability to create inflation is dropping and his thesis for this belief points to trends in gold’s price action.

Click here to read Chris' article.

Community Talk

Re: Define Quantitative Easing Mr. Bernanke

There's always a deflationary headfake before massive inflationary policy... the same happened in 2008.  

It's not that confidence in the Fed's ability to create inflation is waning.  The opposite is happening, the misguided belief that the Fed can CONTROL inflation is gaining momentum - despite all the facts and history to the contrary.  Odds favor inflation as it has been a runaway train for a century.

Everyone is talking about deleveraging.  There has been no deleveraging... all those bad private debts have moved to the public balance sheets.  This has been the CB's mandate, to create liquidity by taking on toxic assets.  The only thing this does is reinforce bad behavior - the banks have demonstrated this ad nauseum and consumer credit is yet again on the rise.  Without a change in attitude, we've done nothing to fix the problem and have only created greater moral hazards.

However, with the current debt issues in Europe, deflationary forces are at work. A debt write-down, as was the case with much of Greece’s debt, is in fact, deflationary. 


All temporary.  As Kyle Bass has been saying, the troika, in the 11th hour will likely decide to recapitalize their banks (by printing) before default and restructuring of bad sovereign debt.  This then gives a green light for the sovereigns to immediately devalue their currency and print at will.