Bernanke warming up the printing press

August 29th, 2010

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Last month, we wrote in Prepare to pull the trigger on speculating! about the signs to watch out for the timing to speculate. Well, the sign arrived over the weekend.

Last Friday, Ben Bernanke gave the strongest hint about money printing. As this article reported,

Federal Reserve chairman Ben Bernanke has laid out four "unconventional" policy options to boost the US economy.

Top of the list is more "quantitative easing" – mass purchases of debt.

"Quantitative easing? sounds technical, but it basically means printing money. In another article, Bernanke is talking tough against deflation,

Federal Reserve Board Chairman Ben Bernanke said Friday that the central bank would not sit idly and let the U.S. economy sink into a period of deflation.

"The Federal Open Market Committee will strongly resist deviations from price stability in the downward direction," Bernanke said in a speech opening the Fed’s annual summer policy retreat.

The Fed would be "vigilant and proactive" if inflation falls by a significant amount, he said, though he downplayed concern that the economy would fall back into another downturn, or a double-dip recession.

As we wrote in our book, How to buy and invest in physical gold and silver bullion,

The United States, with ?helicopter? Ben Bernanke at the helm of the Federal Reserve, is committed to money printing to solve America?s economic woes. To the extent that the US dollar is the world reserve currency, it will affect the rest of the world.

In essence, for investors who still believe in deflation, Bernanke is saying, ?Try me. I dare you.?

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  • Just a hunch, but I don’t believe this round of printing will spark “growth,” in a meaningful way for stocks. Rather, this new kind of printing is designed to subsidize US federal deficits.

    Too much consumer debt, poor economic fundamentals and labor market, and enormous implied tax burden by unconstrained government spending are starting to have negative effects on equities.

    Honestly, it’s about time!

  • Castor

    The stock market is surging 2% as I write. It’s disgusting, but what to do with lunatics running the asylums?

  • Pete

    I agree, it is a problem.

    Although I am not certain that money printing will result in any kind of standardised inflation of assets/prices across the board. For instance, there could be 1% inflation in stocks, 10% inflation in the CPI, 20% inflation in house prices, 50% inflation in the cost of borrowing. Who knows for sure how it will affect anything, other than that it is likely that there will ultimately be inflation of some degree. And we may not know the timeframe for which the inflation will begin to take hold…it could be longer than we think?

    However, ‘QE’ would devalue the USD somewhat, which has its own implications.

  • Castor

    “Although I am not certain that money printing will result in any kind of standardised inflation of assets/prices across the board.”

    Haha… that’s a speculator’s paradise!

  • Cw2u

    Purchasing bad debt is not inflationary, it is anti deflationary and is net zero. The fed can not create liquidity they can only offer it.