Deflation on the prowl as Bernanke shuts down his printing press

U.S. Federal Reserve has finished purchase of mortgage securities, debt agencies and the Treasury at 1.7 trillion dollars (1.1 billion pounds) that was a ruse "credit easing, allowed Bernarke, Ben (Ben Bernanke) create an incentive equal to 12% of GDP.

As noted by Beijing with a certain share of doubts created by the Federal Reserve money supply was more or less proportionate to the credit needs of Washington last year.

We will never know how correct it was to become nuclear powers. In my opinion, and I'm afraid it does not coincide with the opinion of readers, Ben and the British Bernarke Mervin King (Mervyn King) saved us from potential disaster. We were too close to the critical point, described by Irving Fisher (Irving Fisher) in "Causes of debt deflation during the Great Depression» (Debt Deflation Causes of Great Depressions), then there is a time when the ship draws up water and turns instead adjust to the natural rate.

The work of professor from Berkeley Ichgrina Barry (Barry Eichengreen) states that the rate of collapse of global trade, industry and capital markets within six months after the crisis, Lehman was even faster than in the early 1930's. How quickly we forget and how easily seduced by 76% Fund Rally, thinking that this is a storm in a teacup. Now, however, expect retribution through taxes.

1.7 trillion dollars, created out of nothing, disappear, as the bonds sold on the open market. Hopefully, not so fast. Easy money to soften the blow from reduced spending. Even talk about the end of quantitative easing - the desire to tighten. And although the U.S. economy is again creating jobs (+114.000 in March), the rejection of registration of temporary employment has led to false signals in 2002 and 1982. The broader index U6 unemployment rose to 16.9%.

Bond lyncher asked who would assume the role of the Fed, to absorb the flow of debts incurred by the Washington, whether they are from the Treasury Obama or Fannie Mae and Freddie Mac - the mortgage giants from death row.

The yield on ten-year Treasury securities soared by 30 basis points to 3.94% for two weeks. Alan Greenspan (Alan Greenspan) called this a "canary in the coalmine" for sovereign debt of the United States.

There is a surge in profitability, although core inflation (truncated mean personal consumption expenditure) fell like a stone, touching a record low of 1.04% in February. Money multiplier Fed is languishing at the level of 0.815, while continuing to deflate.

Basic fixed mortgage for 30 years rose to 5.08% from 4.71% in December. The housing market in the U.S. is too painful to move eto.Pprodazhi new homes fell four months in a row, dropping to a half-century minimum in February. The current number of unsold homes to sell 8.6 months without new construction. 24% of mortgage loans in negative difference between the cost of credit and debt.

Bernarke now takes the fateful decision to dislodge the support from the credit market, despite the fact that broad money M3 fell by an incredible 6% in September. If the M3 gives early warning of 6 to 12 months - is to be feared.

Bernarke does not take into account the M3, regarding such eccentricity monetarist "medieval witchcraft." Signs of the M3 is certainly not stable for many years. Perhaps this happens because of the movement of portfolios. But the rejection of the simple observation of it was the root of many problems in the past four years. If Bernarke attention, he would have seen the need for an explosion of the credit bubble before. It also would avoid the disastrous mistakes in the early summer of 2008. Hetzel, Robert (Robert Hetzel), chief economist at the Federal Reserve in Richmond, wrote about monetary policy during the recession of 2008-2009, the central banks themselves have triggered a crisis by refusing to quickly cut interest rates when the economy was collapsing from March to July 2008.

Remember this moment. Rates have fallen from 5.25% to 2%. Oil and copper prices were extremely high. "Inflyatsionisty" they shouted, accusing the Fed's laxity in the 1970's, some "high-flying birds from the Fed were to agree.

Fetzel said that the Fed "effectively tightened" policy in June 2008 with the help of tough statements, which resulted in the growth of futures by half a percentage point in September 2008. Obvious proof that the rate of monetary growth has long been falling, have been ignored.

The ECB went even further, raising interest rates in July, when the euro zone is already deeply immersed in a recession. We know what happened. Lehman, AIG, Fannie and Freddie - they collapsed in September. Wheels fall off the global financial system.

I fear that the Fed will repeat the mistake, in this case, reversing the quantitative easing too soon. The problem lies in the ideological doctrine Bernarke, namely "kreditizme.

Do not confess if Fed Chairman false religion? Was Milton Friedman (Milton Friedman) rights, arguing that the money supply is the most important role, not a loan facility?

From this profound doctrinal answer may depend, whether the Atlantic economy to exceed its critical velocity or slide towards recession again?

 

 

 The Telegraph