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Originally posted by Darthorious
1. The fed obviously can't keep up with govt. spending (which isn't surprising who could?) and the govt. could just say screw it and do away with them all together.
Either way the govt. could effectively not only pull the plug on the fed in the end but pretty much put those people that have been all but raping the economical system in poverty. After all if the govt. actually made the money/currency that was used the fed would be worthless.
The problem is that Bernanke is enabling these sky-high deficits by intervening in the Capital Markets - that is, by buying both agency and Treasury bonds!
IF Bernanke was a true independent central banker, and IF he believed the first word that he was speaking, he would force fiscal restraint by refusing to buy any more MBS or Treasury debt.
Rates would move up, but this would put a 1990s-style bond market slam-hold on President Obama's and Congressional "drunken-sailor style" spending binge.
I only look at what people do - a good part of the time what people say is in fact exactly the opposite of what they're doing, because they are trying to goad you into doing something stupid so they can say "Sold To You!", sticking you with the bag.
I will buy that Bernanke is serious about his so-called "urgings" when he withdraws the idiotic attempt to support both MBS and Treasury issuance.
Perhaps - just perhaps - this speech is a warning - Ben has been reading some Tickers and listening to some Chinese folks, and is starting to get concerned that a bond market implosion may be in the offing - and he has no intention of being the one caught holding the bag when it blows up.
Funny how it only took Ben two years beyond when I started screaming about this in public to figure it out!