Saturday, March 7, 2009

Bank of England Leading the Way?

Alas, the Bank of England has consigned itself to deploy the only remaining policy tool at its disposal: Quantitative Easing(QE). Now, preferring to call it like it we see it, we will refrain from using the term "quantitative easing", and instead refer to the Bank's actions in the colloquial, as Money Printing.

We are quite sure that a child as young as eight or so, having been provided with a clear explanation of Money Printing activities, would be able to conclude that this behavior could potentially be damaging to the value of said money. This is perhaps why Central Bank activities are shrouded in such esoteric terms as Quantitative Easing, the danger being a widespread realization, by the Proles, as to what the Bank's were doing to their already meager pittance.

Now, official statements from Dr. Bernanke would indicate a Fed resistance to embarking down the path of Money Printing via central bank purchases of Treasury securities. However, we have, on these pages, shown quite clearly that there is little to no credibility behind Fed statements, and fully expect the Federal Reserve to follow suit and launch an aggressive Treasury purchase program sometime this year. Whether this program is implemented sooner or later depends largely upon the breadth and ferocity of Treasury Market counter attacks. These attacks, which are a direct response to weeks upon weeks of record Treasury security issuance, have the side effect of increasing the Federal Government's borrowing costs at the most inconvenient of times. There will come a point in this process where the Fed/Treasury will realize that the only affordable way to finance the Government's spending activities is to allow the Fed to buy Treasuries with money created from thin air. We await with trepidity. Sphere: Related Content

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