Since the economic collapse, the Federal Reserve System has been the only lifeline for Wall Street. With an aggressive and expansive quantitative easing policy and holding interest rates at record lows, the stock market experienced record gains and more people got rich off of disingenuous wealth.
This year, the United States central bank has cut back on its monthly bond-buying program, though it still maintains an astronomical $4 trillion balance sheet. It’s now expected that the cheap money will end by the end of the year and interest rates will start to jump by the middle of next year – economists have been predicting this for eons.
As the Fed’s strategy wanes and tapering persists, the markets are undergoing a freefall. Here are some examples:
– S&P 500 erased year-to-date gains on Oct. 15
– Treasury bonds was a victim of a flash crash when it dived 14 percent
– Dow Jones experiencing a drop by as much as 200 points
It seems without the Fed’s stimulus – money supply expansion has dropped off in the last year akin to prior to the great crash of 1929 – the market can’t survive on its own. The Fed tried to take the training wheels off, but the market wasn’t able to ride the bicycle on its own.
There is already talk of the central bank introducing the fourth edition of QE starring Janet Yellen and Stanley Fischer. Economists at financial institutions and television pundits are discussing this very possibility. Yellen is already concerned about the labor market and inflation so in her line of thinking it would make sense to implement a fourth round of bond-buying and maintaining low interest rates.
Dallas Federal Reserve President Richard Fisher slammed reports that QE4 is coming about and told the Fox Business Network it’s “way too premature” to think about more bond acquisitions.
“From my perspective, it’s much too early to even think about another quantitative easing,” Fisher said. “As we’ve been saying for a long time, we’ve already fed the market too much Ritalin. And now [with the tapering] the market is correcting itself without our involvement. It’s way too premature to talk about another QE because the market’s actually doing the work.”
Who can ever believe an official from the Fed?
In either case, Peter Schiff was right again. Schiff has been warning for the last several months that as the Fed reduces QE the markets would start to tank because it relies on its monthly injections of cheap money. He also argued that the Fed would probably reintroduce QE because the central bank would notice the consequences of its dwindling stimulus.
Schiff was repeatedly laughed out of the room again and accused of being a financial fearmonger. However, similar to the financial crisis a few years ago and the Fed postponing QE tapering last summer, it seems Schiff is right again.
Here are some Economic Collapse News articles:
Peter Schiff: U.S. stock market bubble will collapse amid Fed QE tapering
Peter Schiff: Yellen will reverse taper, increase QE; U.S. to head into recession
Peter Schiff vs. Paul Krake: A battle over gold, inflation and QE
Will there be a new “Peter Schiff Was Right” video soon?
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