Mish Shedlock and I had a big laugh at the Fed's expense today. They announced they might buy bonds differently, printing up money out of thin air, and then sterilizing the proceeds of their bond purchases to prevent inflation from taking hold. However, this is pure folly. If their intention is to give business lending a jump-start, it will have the opposite effect because many businesses looking to borrow are not credit worthy. Those that are credit worthy aren't interested in borrowing since they have no profitable avenues in which to invest it.

Like putting the toothpaste back in the tube, the thought that somehow the Fed can print money, use it to monetize debt, and then stop the recipients of the new money from spending it is somewhat absurd. This hasn't worked before, and it won't work now. So sit back, buckle your seatbelt and enjoy the flight into the tumultuous financial skies. It's going to get quite turbulent, but having gold and silver might very well make the ride smoother. 

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Direct download: MIsh_Shedlock_03-07-2012.mp3
Category:general -- posted at: 6:31pm EDT

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