'Fed Has No Possibility Of Withdrawing Stimulus'

by JASmius



QE-Infinity:

With oil prices having plunged to five-year lows, the energy industry is headed for bust, but that's not our biggest worry, says Peter Schiff, CEO of Euro Pacific Capital.

"Much greater and more fragile bubbles likely exist in the stock, bond and real estate markets, which have also been inflated by the easiest monetary policy in history," he writes in a commentary on his firm's website.

"The Fed lacks the firepower to fight a new recession that a bursting of any of these bubbles could create," Schiff says.

"Since interest rates are already at zero, it has no ability to aggressively cut rates now in the face of a weakening economy. All it can do is go back to the well of quantitative easing, which is exactly what I think they will do."

Indeed, it dares not do anything else.  Allowing the market to set interest rates would cause the latter to skyrocket, which would explode government deficits at all levels, wipe out heavily leveraged companies of all sizes as well as a large swath of the American consuming public, and otherwise create the economic equivalent of the nuclear nightmare scene in Terminator II:



Also remember that currency debasement is the only thing creating the fiction of that "economic recovery" we've been hearing about for the past five years, which never quite seems to ever materialize, just as it also has fueled these multiple economic "bubbles".  And therein lies the irony: The U.S. economy has, in reality, never recovered at all, and the bursting of any or all of the bubbles that "quantitative easing" has inflated will make the Obama depression even worse, beyond any capability of the Fed or any "stimulus" program to conceal.

On the bright side, terminal deflation is a stout barrier against runaway hyperinflation - which will ensue the moment the U.S. economy ever actually starts to recover.  But that will be President Walker's problem, won't it?  Assuming, of course, that there ever is one.

Exit suggestion: Maybe we should start bombarding the White House with t-shirts sporting the phrase, "U.S. Economy To Obama: 'I can't breathe'".  Heck, I'd buy one, and I don't have an income.