The Federal Reserve’s Next Moves …

[ProPlayr]

We are now entering a period of time that I’ve been warning you about. A time when the majority begins to recognize that the U.S. and European economies are both plunging deep under water, drowning in debt …

While at the same time, leaders in both the U.S. and Europe face political nightmares … financial markets going haywire … gold soaring through the roof … and central banks beginning, yet again, to pull out their big guns.

And no central bank has bigger guns than our own Federal Reserve.

Make no mistake about it: In the weeks and months ahead, you are going to see Fed Chief Ben Bernanke pull out nuclear-sized bombs to try and destroy the debt crisis that is affecting the world.

But wait you say, hasn’t the Fed already shot all of its bullets?

My answer: No, it hasn’t. The Federal Reserve has far more fire power than almost anyone believes. Mind you: It will not alter the fate and destiny of the economy. But it will alter the way the economy goes down in flames.

Understanding this is the single biggest key you need to know to protect your money — and build wealth — in the months ahead.

The Fed Has Plenty Of Ammo Left

Many believe that since the Fed has already printed trillions of dollars … pushed interest rates to near zero … and supported the mortgage and Treasury note and bond markets — that it is effectively “out of bullets.”

And to some extent, they are right. In the sense that their policies thus far have failed to create any real economic growth.

But the pundits who claim the Fed has no ammo left, are dead wrong. The Fed has some very heavy artillery that it can — and will — bring to the fight against the debt crisis in the weeks and months ahead.

Let me review them with you now …

Fed Weapon #1: The Fed can print as much money as it wants. There is no limit to how much it can print. Everyone knows that, but few believe the Fed will print unlimited amounts of money.

Don’t kid yourself. There is no legal or political body the Fed has to answer to. So it can and will print fiat money ad infinitum.

Ben Bernanke and the Fed still have plenty of tricks up their sleeve in a losing battle against the debt crisis.

Fed Weapon #2: The Fed could also take some of that money and begin buying stocks and real estate for its own account. There is nothing to prevent the Fed from doing that either.

It could buy a trillion dollars or more of stocks and real estate. It can park those assets on its balance sheet, for as long as it wants. Investors who sell their stocks and real estate to the Fed effectively receive money that previously did not exist.

Moreover, the Fed could even set the prices at which it will buy stocks and real estate, at levels well above current market values. It could, in essence, buy anything it wants, at any price it wants, park the assets on its balance sheet, and wait for as long as it needs to before putting the assets back up for sale.

Mind you, the economy would still continue to sink in the interim. But the Fed is hoping that by buying time, the economy would eventually rebound enough for things “to get back to normal” — so to speak — and then, as I noted, it would unload its assets and drain money back out of the system.

Fed Weapon #3: The Fed could lower the bank reserve requirement — which is currently 10% for all bank liabilities over $55.2 million — all the way down to zero.

In effect, it could tell banks that for every $10 of customer deposits it holds, not one penny has to be parked at the Fed anymore as collateral.

While that does not guarantee that banks will start to aggressively lend again, it does add further liquidity to the system.

But that’s not all …

Fed Weapon #4: The Fed could penalize banks for not lending to the economy! Yes, that’s right. For instance, right now the Fed pays banks 0.25% on the excess funds they park with the Federal Reserve, funds that are above and beyond what is required to be held at the Fed as reserves.

But as we all know, banks have not been in a lending frame of mind. For a variety of reasons. One of those reasons however, is this current policy of paying banks a risk-free 0.25% on their excess funds that they’re keeping with the Fed.

So instead, the Fed could simply do a 180 — and tell banks that it is no longer going to pay them any interest on their excess reserve funds.

The Fed can even go a step further, and effectively tax or penalize banks for not making loans out to the general economy.

Worse comes to worst, the Fed could default on all government obligations by devaluing the U.S. dollar.

Fed Weapon #5: The Fed can engineer a “default on the sly” on all government obligations, effectively inflating away America’s debts, by DEVALUING THE U.S. DOLLAR, forcibly and clandestinely.

Of course, the consequences of the four preceding strategies will likely devalue the dollar.

But lest the value of the dollar does not fall enough, the Fed can print up ever more dollars, sell them in the open market … buy other currencies … and put much more pressure on China to revalue its currency higher (and the dollar lower).

In short, the Fed can do whatever it wants, whenever it wants. It does have plenty of ammo left.

In fact, in my opinion, the Fed’s battle against the financial crisis (and deflation) has barely begun.

Which is all the more reason to own the only real form of money that has always maintained its purchasing power: Gold!

http://www.uncommonwisdomdaily.com/the-federal-reserve%E2%80%99s-next-moves-%E2%80%A6-10064

[DiNaR DoCtOr]

Though I would not use weapons or ammo when describing the Fed's options for monetary policy, I would agree that most people do not understand those monetary policy options and their effectiveness. I find it odd that many people will say the Fed is too powerful, but yet make claims to their demise. The Fed is not one person. It is a organization of individuals specializing and researching topics many of us here on DV have grown to appreciate. I am not an employee of the Fed either, just more optimistic about the integrityof their mission.

[Blueriot]

Actually you're a little off base here - The fed can do all of these things, sure, but the market has pretty much priced in most of it.

The thing about monetary policy is the more you do it, the less effect it has on the market and for a shorter amount of time - This is really clearly seen in the POMO (permenant open market operations) that have been taking place basically since 2008. By the time we got to QE lite in August of last year the fed was already injecting fresh money into the markets (via treasury buybacks through the fed window) - They were able to keep things going by doing this once or twice a week. Then in september it went to 3 times a week, then in November with the introduction of QE2 it went to 5 days a week and all the daily amounts at least doubled. And that's where we are today, with stock market volume down 40% year over year from last years shitty shitty year of volume, and it's because everybody realizes that only a sucker plays a game as obviously rigged as this (unless you're the one rigging it).

Sure, the fed could do all the things you said (although they're genuinely not allowed to buy any assets except best investment grade rated assets, and even then they're only supposed to be used as collateral), but at the rate things are degrading it just won't matter. This snowball has been rolling down hill for awhile, and sure they could stand in the way but I just don't see that ending happily for anyone.

I'm not going to respond point by point, but you're wrong lol... Most of those options the fed has already tried in one iteration or another (like the print to infinity, default on the sly, etc) and while they might have been useful in another situation, we're in a global event here and you can't devalue-to-default if everybody else in the world is doing the same thing.

No, the real problem, and the one that the fed simply cannot get around is that they're holding up the financial world on their weakening shoulders - The REAL problem is that the system is stuffed with so much debt as a result of really stupid bets placed by the banks that were in many cases illegal and in all cases unethical - That's why we still have suspended FASB accounting rules (because they're all still insolvent and if they were forced to mark their assets to current value it would be 2008 lehman x 12) - That's why the recovery is non-existent, yet banks have trillions in reserve that "nobody knows why they're not lending" - It's simple, if they lend the money they're officially insolvent again. So they can't lend the money.

Not to mention the new Basil requirements (while laughably underwhelming) are STILL enough to knock them all into insolvency again.

Ironically this transfer of wealth is happening right in front of everybody, and insider trading is no longer a crime (if you work in the management of a bank or our government) but rather a way of life - For more info on this see Goldman Sach's 96.7% profitable trading days this last year. Yeah, Goldman is just that good. lol.

So don't worry too much, this part of history is almost over. Then we get the really really bad couple of years (because of course our leaders are going to make sure they don't leave without causing a whole bunch of death and misery), then we hopefully get a break of 20-30 years where we can actually do some business before our kids or our kid's kids lack the experiance to say "NO" when the 3rd Central Bank of America, or whatever such malarky comes to be

This is a long game, luckily it's our turn to win.

[legacyman73]

I would like to see the Feds go away..

[Slaydadea]

We are now entering a period of time that I’ve been warning you about. A time when the majority begins to recognize that the U.S. and European economies are both plunging deep under water, drowning in debt …

While at the same time, leaders in both the U.S. and Europe face political nightmares … financial markets going haywire … gold soaring through the roof … and central banks beginning, yet again, to pull out their big guns.

And no central bank has bigger guns than our own Federal Reserve.

Make no mistake about it: In the weeks and months ahead, you are going to see Fed Chief Ben Bernanke pull out nuclear-sized bombs to try and destroy the debt crisis that is affecting the world.

But wait you say, hasn’t the Fed already shot all of its bullets?

My answer: No, it hasn’t. The Federal Reserve has far more fire power than almost anyone believes. Mind you: It will not alter the fate and destiny of the economy. But it will alter the way the economy goes down in flames.

Understanding this is the single biggest key you need to know to protect your money — and build wealth — in the months ahead.

The Fed Has Plenty Of Ammo Left

Many believe that since the Fed has already printed trillions of dollars … pushed interest rates to near zero … and supported the mortgage and Treasury note and bond markets — that it is effectively “out of bullets.”

And to some extent, they are right. In the sense that their policies thus far have failed to create any real economic growth.

But the pundits who claim the Fed has no ammo left, are dead wrong. The Fed has some very heavy artillery that it can — and will — bring to the fight against the debt crisis in the weeks and months ahead.

Let me review them with you now …

Fed Weapon #1: The Fed can print as much money as it wants. There is no limit to how much it can print. Everyone knows that, but few believe the Fed will print unlimited amounts of money.

Don’t kid yourself. There is no legal or political body the Fed has to answer to. So it can and will print fiat money ad infinitum.

Ben Bernanke and the Fed still have plenty of tricks up their sleeve in a losing battle against the debt crisis.

Fed Weapon #2: The Fed could also take some of that money and begin buying stocks and real estate for its own account. There is nothing to prevent the Fed from doing that either.

It could buy a trillion dollars or more of stocks and real estate. It can park those assets on its balance sheet, for as long as it wants. Investors who sell their stocks and real estate to the Fed effectively receive money that previously did not exist.

Moreover, the Fed could even set the prices at which it will buy stocks and real estate, at levels well above current market values. It could, in essence, buy anything it wants, at any price it wants, park the assets on its balance sheet, and wait for as long as it needs to before putting the assets back up for sale.

Mind you, the economy would still continue to sink in the interim. But the Fed is hoping that by buying time, the economy would eventually rebound enough for things “to get back to normal” — so to speak — and then, as I noted, it would unload its assets and drain money back out of the system.

Fed Weapon #3: The Fed could lower the bank reserve requirement — which is currently 10% for all bank liabilities over $55.2 million — all the way down to zero.

In effect, it could tell banks that for every $10 of customer deposits it holds, not one penny has to be parked at the Fed anymore as collateral.

While that does not guarantee that banks will start to aggressively lend again, it does add further liquidity to the system.

But that’s not all …

Fed Weapon #4: The Fed could penalize banks for not lending to the economy! Yes, that’s right. For instance, right now the Fed pays banks 0.25% on the excess funds they park with the Federal Reserve, funds that are above and beyond what is required to be held at the Fed as reserves.

But as we all know, banks have not been in a lending frame of mind. For a variety of reasons. One of those reasons however, is this current policy of paying banks a risk-free 0.25% on their excess funds that they’re keeping with the Fed.

So instead, the Fed could simply do a 180 — and tell banks that it is no longer going to pay them any interest on their excess reserve funds.

The Fed can even go a step further, and effectively tax or penalize banks for not making loans out to the general economy.

Worse comes to worst, the Fed could default on all government obligations by devaluing the U.S. dollar.

Fed Weapon #5: The Fed can engineer a “default on the sly” on all government obligations, effectively inflating away America’s debts, by DEVALUING THE U.S. DOLLAR, forcibly and clandestinely.

Of course, the consequences of the four preceding strategies will likely devalue the dollar.

But lest the value of the dollar does not fall enough, the Fed can print up ever more dollars, sell them in the open market … buy other currencies … and put much more pressure on China to revalue its currency higher (and the dollar lower).

In short, the Fed can do whatever it wants, whenever it wants. It does have plenty of ammo left.

In fact, in my opinion, the Fed’s battle against the financial crisis (and deflation) has barely begun.

Which is all the more reason to own the only real form of money that has always maintained its purchasing power: Gold!

http://www.uncommonw...%E2%80%A6-10064

Don't think for a moment I don't appreciate your post, I do. If you haven't already, please take another look at someone's else's perspective. A 4 part series known as "The Rabbit Hole". Link bellow. I subscribe to "Uncommon Wisdom" as well. Both sources help me paint a clearer picture in my own mind. Thanks for putting the word out.

http://dinarvets.com...__fromsearch__1

Don't think for a moment I don't appreciate your post, I do. If you haven't already, please take another look at someone's else's perspective. A 4 part series known as "The Rabbit Hole". Link bellow. I subscribe to "Uncommon Wisdom" as well. Both sources help me paint a clearer picture in my own mind. Thanks for putting the word out.

http://dinarvets.com...__fromsearch__1

Forgot to say, Great Post!

Edited February 16, 2011 by Slaydadea

[Hope Floats.Rates Dont]

I would like to see the Feds go away..

?

I am all for "smaller Govt" but the Fed Reserve is truly why we all sit here and watch the market and the RV. If not for our dollar (and our Fed, mind you) there would be no standard for the rest of the world economy to strive for...

I know we are really, REALLY damaged right now with the mess our leaders have made and the debt WE have allowed to be brought, but have NO doubt...we are still the greatest and most industious nation on earth. If you are a true Dinar "vet" you know this...go to any other country, complain like we can here and see the outcome.

[BanG]

Actually you're a little off base here - The fed can do all of these things, sure, but the market has pretty much priced in most of it.

The thing about monetary policy is the more you do it, the less effect it has on the market and for a shorter amount of time - This is really clearly seen in the POMO (permenant open market operations) that have been taking place basically since 2008. By the time we got to QE lite in August of last year the fed was already injecting fresh money into the markets (via treasury buybacks through the fed window) - They were able to keep things going by doing this once or twice a week. Then in september it went to 3 times a week, then in November with the introduction of QE2 it went to 5 days a week and all the daily amounts at least doubled. And that's where we are today, with stock market volume down 40% year over year from last years shitty shitty year of volume, and it's because everybody realizes that only a sucker plays a game as obviously rigged as this (unless you're the one rigging it).

Sure, the fed could do all the things you said (although they're genuinely not allowed to buy any assets except best investment grade rated assets, and even then they're only supposed to be used as collateral), but at the rate things are degrading it just won't matter. This snowball has been rolling down hill for awhile, and sure they could stand in the way but I just don't see that ending happily for anyone.

I'm not going to respond point by point, but you're wrong lol... Most of those options the fed has already tried in one iteration or another (like the print to infinity, default on the sly, etc) and while they might have been useful in another situation, we're in a global event here and you can't devalue-to-default if everybody else in the world is doing the same thing.

No, the real problem, and the one that the fed simply cannot get around is that they're holding up the financial world on their weakening shoulders - The REAL problem is that the system is stuffed with so much debt as a result of really stupid bets placed by the banks that were in many cases illegal and in all cases unethical - That's why we still have suspended FASB accounting rules (because they're all still insolvent and if they were forced to mark their assets to current value it would be 2008 lehman x 12) - That's why the recovery is non-existent, yet banks have trillions in reserve that "nobody knows why they're not lending" - It's simple, if they lend the money they're officially insolvent again. So they can't lend the money.

Not to mention the new Basil requirements (while laughably underwhelming) are STILL enough to knock them all into insolvency again.

Ironically this transfer of wealth is happening right in front of everybody, and insider trading is no longer a crime (if you work in the management of a bank or our government) but rather a way of life - For more info on this see Goldman Sach's 96.7% profitable trading days this last year. Yeah, Goldman is just that good. lol.

So don't worry too much, this part of history is almost over. Then we get the really really bad couple of years (because of course our leaders are going to make sure they don't leave without causing a whole bunch of death and misery), then we hopefully get a break of 20-30 years where we can actually do some business before our kids or our kid's kids lack the experiance to say "NO" when the 3rd Central Bank of America, or whatever such malarky comes to be

This is a long game, luckily it's our turn to win.

Great Post! Appreciate the bit of education I received here from your information. Peace.

[balkanbob]

In response to legacyman73 wanting the fed to go away. It may happen. When and if are the questions.. Bill Clinton signed into law the National Security and Reformation Act in 2000. Whenever the Supreme Court decides to announce it. We will be under Constitution Law again and the Fed banking system will be replaced. Like the Iraqi Dinar revaluation we must be patient it will come. After WW2 the German mark rebound. The Japanese Yen came back. The Iraqi Dinar will do the same. Because history does repeat it's self. Be patient with Adam Montana he is on the right track. So are most of us.