Significant attention was given to the "unconventional tools" Ben Bernanke is considering. The main tool under consideration is having the Fed buy more assets, like treasuries, to lower market interest rates and keep them low for an even greater period of time. This is direct monetization of the debt. This is something the Fed has hidden, obfuscated and outright denied when challenged about publicly in recent years. Those who suggested such things have not always been taken seriously. Now the Fed is announcing such measures as official policy with little or no fanfare, and definitely no outrage, in the media.
Click to Play Robert Ian's GoldSeek Radio Commentary Download mp3
The unconventional tool of the Fed buying treasuries is simply an acknowledgement of what's been going on for quite some time. The important question is what happens when people recognize that this doesn't work? Currently 1 in 8 Americans are receiving food stamps. There are over 8 1/2 million homes in some stage of default or foreclosure. Over 8 million jobs have been lost that are not being replaced. Credit scores in this country have been shredded and will soon reach the point of becoming obsolete. Many pundits talk about banks not lending money. The fact is banks are not going to lend money. If you're on food stamps, unemployed or your home is in some stage of default do you think you're going to get a loan? Not likely with the current financial system.
Since this problem continues to get worse, the strain on the current financial system is rapidly making the old ways of doing things, obsolete. We are approaching a point in time where systemic change must occur. That systemic change will not take place until current policies have clearly failed. For those failures to be recognized, it is my opinion that hyperinflation must take center stage. When that occurs, the true state of the economy can no longer be denied or disowned. It must be accepted.
When buying treasuries no longer works. The next and final stage of attempting to resuscitate a dying financial system may include injecting liquidity directly into the hands of consumers and bypassing the banks altogether. Imagine getting an envelope of gift certificates from the government that includes a $20k certificate good toward the purchase of a home or condo. A $10k gift certificate good toward the purchase of a new car. A $5k gift certificate good toward health insurance costs as we bridge the gap into national healthcare. And an assortment of $1k gift certificates good toward whatever industries have garnered favor with congress through healthy campaign contributions. And don't worry, everyone will agree on it because it will be "bipartisan".
You think something like this sounds unlikely? Don't laugh. If you had gone onto the national financial shows three years ago and predicted what has happened the past two years, you would have been laughed at, discredited and probably never asked back for a second interview. But you would have been right. Our challenge isn't a failure of nerve, because most people have been challenged financially and emotionally in ways they never could have imagined three short years ago, and have had to draw upon strengths and reserves they did not know they possess, just to survive. Many still are.
No, our challenge is a failure of imagination. Because the conventional wisdom of just three short years ago got it all so terribly wrong. Now the pundits who all missed what happened, are trying to tell us they know what's coming next. Don't bet on it. You know the old saying: fool me once, shame on you. Fool me twice...well, let's not get fooled a second time.
