Liberty Newswire – 9/13/2012

[The Liberty Insight Newswire is an aggregation of what we consider to be important financial and political news and commentary from across the web.]

Fed Chairman Bernanke Announces New Fed Policy

Welcome to this week’s special global money printing orgy edition of the Liberty Newswire. Today is Fed Day, the day when one bald, bearded man comes down from the mountain and decrees what fate will befall the global economy. This man holds the power to move mountains (of money) with the mere sound of his voice.

For those who missed it, today the Federal Reserve pledged to keep interest rates near zero until 2015 and continue it’s operation twist. In addition, it pledged to print $40 billion a month (or more as needed) to buy mortgage backed securities until the end of time or the economy recovers, whichever comes first.

In response, the stock market, gold, silver, oil, and pretty much everything else priced in dollars shot through the roof. Long dated treasuries fell as perhaps investors are finally starting to realize the money printing means inflation which is bad for fixed income.

But the US isn’t the only country printing, stimulating, and otherwise trying to debase their currency. The articles below shed some light on the Fed’s actions and the actions of governments and central banks around the world in their race to the bottom.

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Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates
CNBC, September 13, 2012

I’m not sure why there is a comma in that headline. Kinda weird. Anyway, here’s a good summary of the Fed’s actions today.

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Dollar no longer primary oil currency as China begins to sell oil using Yuan
Examiner.com, September 12, 2012

Since this blog began I have been trying to point out the warning signs and consequences of the dollar losing its status as the world’s reserve currency. Ignore those signs at your own risk.

Since Nixon removed gold backing from the U.S. dollar in 1971, the dollar has been supported by its Petrodollar status. Basically, countries around the world have had to acquire U.S. dollars to buy oil. With this announcement to trade oil only in Yuan, China has signaled the end of the USD reserve currency status. This is absolutely huge but somehow, not newsworthy to the mainstream press.

If your salary, savings, stocks and bonds are all denominated in and dependent on U.S. dollars, you may want to consider a little currency diversification. Perhaps gold.

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ECB outlines bond-buying program
CNN, September 6, 2012

European Central Bank president Mario Draghi outlined the details of a plan to buy euro area government bonds, reiterating his pledge to do “whatever it takes” to preserve the euro.

And by “whatever it takes” he means buy shit-tons of crappy Spanish and Italian debt. And by “preserve the Euro” he means maintain the Euro’s slow, steady glide path to worthlessness. Everyone was thrilled, except the Germans who will end up footing the bill, which leads us to our next story…

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Germany Can Ratify ESM Fund With Conditions, Court Rules
Bloomberg, September 12, 2012

German Chancellor Angela Merkel was finally on board with the ESM bailout facility which would enable the ECB to buy the crappy bonds discussed above. Not so fast. A lawsuit in the German Constitutional Court threatened to block the ESM ratification. The court denied the lawsuit was denied but the court did stipulate that German contributions to the ESM could not exceed 190 billion Euro without legislative approval. In other words, once the ESM fails, the German legislature will once again need to decide if they are going to throw more money down the toilet.

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China adds highways to stimulus plan
Wall Street Journal, September 6, 2012

China has announced a $127 billion stimulus package to build roads, trains, ports and other municipal projects over the next 3-8 years. Heck, they have to do something with all the U.S. dollars flooding their economy. They certainly don’t want to buy any more Treasuries. At least this way they’ll have nice roads in 8 years instead of worthless pieces of U.S. government paper.

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