March 8, 2011
On Monday, Atlanta Fed boss Dennis Lockhart said that if oil prices continue to climb the Fed will make a new round of asset purchases, in other words it will kick off QE3.
“If [the rising price of oil] plays through to the broad economy in a way that portends a recession, I would take a position we would respond with more accommodation,” Lockhart said at the National Association of Business Economics in Arlington, Virginia.
Lockhart said the magic number for the price of oil is in the range of $150 per barrel. “I think at the $120 range … it’s a manageable level,” he said. “Around $150 it becomes a much more serious concern.”
Lockhart “echoed widespread concerns that surging oil prices would put the brakes on a recovery that only just seems to be taking hold,” reports the Wall Street Journal. “With Brent crude hovering at around $115 a barrel, having made at stab at $120 over recent sessions, investors are looking back to the summer of 2008 when oil made a run at $150 a barrel.”
In response to the unfolding economic depression last November, the private Fed announced plans to buy $600 billion in long-term Treasuries, known as quantitative easing. QE2 – and now possibly QE3 – do nothing for the broader economy, however.
- A d v e r t i s e m e n t
The provided excuse for cranking up the funny machines and printing a ton of fresh new fiat dough is that it boosts the economy. In fact, the scheme does nothing for the larger economy or the nation as a whole – infrastructure projects, education, health care, business development, etc. – as you might expect (if you follow the Fed’s reasoning). Instead, it is a gift for the financial industry and the banksters. The excess paper money flows into the stock market and creates dangerous asset bubbles around the world.
Even establishment economists like former Clintonite Robert Reich warn that the rapid in-flow of funny money will simply create another stock market bubble. It is a classic Ponzi scheme designed to reach dizzying heights and then crash.
Some financial experts say QE2 was not designed to terminate. It was engineered to go on forever, or at least until the entire economy explodes. According to these experts, there was no QE1 and there is now no QE2 – there is simply one long “accommodation” that will eventually spell disaster.
“The Fed never said that QE2 would end,” notes finance expert James Rickards, “that’s a popular misconception but they never said it. What they said was that they would buy $600 billion of intermediate term Treasury securities by June 2011. They never said that was all they would buy. They never said they would stop. The comments were carefully worded so that $600 billion by June was a targeted minimum but they never said anything about a maximum; technically there is no maximum. The first QE program ended in 2010 and the economy immediately began to fall into a double dip.”
Bernanke and the Fed are not finished attacking the dollar. They are determined to kick off another round of debilitating inflation, the ultimate result whenever the money supply is artificially expanded. It is a scientific process, as Congressman Charles Lindbergh said after the Federal Reserve was created in 1913.
QE is forever.