The economy is in the tank, the national debt is out of control, the banks are largely insolvent, the housing market is under-water, and Washington is a dysfunctional political jungle.
So hey guys, let us live things up in the Eccles Building’s Kit-Kat club! Let us pour a few cool ones down for B.O. on November 6, and enjoy Ben Bernanke’s generosity as an effusive, big-spending Master of Ceremonies. And always remember that life is a cabaret, old friends, life is a cabaret!*
Just keep a half eye open for those shadows in the corner of the club. They just may be National Socialists waiting in the wings for inflation to take its toll. And believe me, my friends, life will then be no cabaret, save for those with a penchant for surviving under dictatorship.
Revelers in the Kit-Kat club had been clamoring all night long for the Master of Ceremonies to refill the punch bowl. Ever anxious to please, Bernanke responded to the cries, as he had done twice before. This time, however, he forgot the fruit juice. The punch bowl is over-flowing with 80 per cent alcohol and the spigots will remain wide open until no one is left standing. Now this is a real cabaret!
Quantitative easing 3 is here to stay. The Fed will buy $40 billion of agency-backed mortgage securities a month indefinitely, funding its outlays through the printing press. It will keep rates at rock-bottom levels through the middle of 2015 and it will retain such an accommodative policy for a considerable time period after the economy strengthens.
As clearly as Bernanke can make it, without using the dreaded words, the Fed is now dedicated to inflating the US economy out of stagnation. As surely as history has demonstrated, Bernanke is leading the U.S. economy into stagflation. Given usual monetary lags, Bernanke will be safely exiled on some offshore island by the time that this calamity hits the large majority of Americans insufficiently skilled to avoid its catastrophic consequences.
As always, the prescient will survive. Yesterday gold jumped 2.2 percent to trade at $1,750 an ounce.
* Musical Cabaret 1972
Hat Tip: The Lex Column, ‘QE3′, Financial Times, September 14, 2012