September 16, 2012
In the below attached article at SeekingAlpha Monty Agarwal correctly explains that the FEDís all out effort to generate inflation (though the Bernanke doesnít quite put it like that) will hurt everyday people.
Marc Faber said the same thing in an interview on Friday:
The open ended QE of the FED announced on Thursday, coupled with the new efforts of the ECB announced the week before that, combined with a likely future move by the Bank of China will benefit the rich (in relative terms to their more impoverished brethren,) while hammering the poor and middle class.
Old prudent middle class people who saved their entire lives used to live off of CD yields. Now? No chance Lance.
Agarwal also predicts that the actions of the FED (and the ECB) will induce money currently on the sidelines into the game, which will move markets and prices for commodities, up.
From Seeking Alpha
ďThis new move by the FED is unleashing massive amounts of money into the risk assets. Markets will now believe that, between the ECB and the FED, all tail risks to the markets have gone.
In other words, this could mean that all the money that was hiding in the safety of U.S. Treasuries will now leave the Treasury markets and flow into equities and commodities.Ē
$5/gallon gas might indeed happen soon, along with $5/gallon milk. Who knows where bread, eggs, coffee, and other staples will go?
Will wages rise along with the cost of living? For some they might. For many they will not.
Those who will see their relative wages decline are people are likely to be the poorest in society already, and Iím not just talking about people in the United States who at least for the time being have access to food stamps.
No, I am talking about the billions more, truly impoverished people throughout much of the developing world. In some places if the price of rice goes up too much, people die.
Think about that. For the sake of keeping this system limping along until some kind of bitter end the Federal Reserve is perfectly happy with pricing some people out of the market for food.
Still, many will argue, if the FED didnít go bananas printing it would be much worse. We need to prime the pump until the economy comes back.
I am asking right now if there is anyone out there who honestly believes that the FED actions will restore the economy? Anyone? Clearly there must be some folks because no one in Washington has wrestled the steering wheel away from Bernanke yet.
This measure has been
successful in bringing down the bond yields for Spain, Italy and Ireland to
a very manageable level. And it is likely that those central banks might not
even need to tap the ESM.
But I fail to see how it will manage to do that "in the context of price stability" while creating asset price inflation through unabashed QE programs.
This new move by the FED is unleashing massive amounts of money into the
risk assets. Markets will now believe that, between the ECB and the FED, all
tail risks to the markets have gone.
This means that the coupons on newly issued
government and agency bonds will be stuck at below inflation rates.