While we were led to believe that the Fed would begin tightening upon recovery, new fears of a double dip have sparked the Keynesian clan into moving in the opposite direction. Soon enough, we believe, a new quantitative easing program will be unveiled.

Bernanke is Afraid to Raise Rates

Perhaps the most perma-bear of them all is Ben Bernanke, who after nine months straight of economic gains has yet to let loose on historically low rates. Mind you, the recovery is fragile, however in no time in history has virtually free money ever solved any problems. The most recent real estate bubble was a product of low rates, as was the bubble prior to the Great Depression, and so will be the next bubble.

Knowing this, Bernanke is afraid more of the chance the US will double-dip or inflation will take hold than he is of absolutely destroying the dollar to the point where it isn’t even worth the paper on which it is printed. After nine months of growth, one would expect at least a tenth of a point increase from rates of 0-.25%.

Another Dip Lurks

While we cannot be certain a double-dip recession is in store, the Economic Cycle Research Institute, which publishes the ECRI leading indicator, nearly is. The reading collapsed to a 45 week low of -5.7, the quickest slide since the Great Depression. A reading that low is generally a very good indicator that you should expect a recession within the next three months. In the Fed’s own releases, they have replaced the word “strengthening” with “proceeding” to describe the current state of the US economy.

Prominent Keynesians Call for Stimulus and QE

Perhaps the loudest of all the Keynesians, Paul Krugman has authored more and more Op-Eds to the largest papers calling for either an increase in government spending, quantitative easing, or both. In each, he blasts conservatives for railing against government spending to fuel the economy and notes that the first stimulus package was not enough to keep the US from falling into depression.

His voice sheds an important light on the status of the Keynesian think-tank, as Krugman generally mirrors the opinions and outlook of Bernanke. Krugman, of course, also has plenty of political clout, having won a Noble Peace Prize in Economics.

2011 Debt Issues

One of the biggest reasons the Federal Reserve will have to use quantitative easing is that interest rates will rise sky-high with inaction. Just last year, the Federal Reserve displaced nearly 90% of the entirety of the fixed-income market with quantitative easing. Next year, there will be no support, and ten times more debt will reach auction, straining the credit markets. These same credit markets finance government debt as well, and with limited funds and nearly unlimited debt loads, we have to wonder how high treasury rates will rise without support.

Get Ready

The Fed will again use quantitative easing as a way to buy their way out of a depression. The expense, however, will be great—a weaker dollar and eventually higher interest rates. Buy precious metals ahead of the program because afterward they won’t look very cheap.

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

Copyright © 2015 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.