Michael Pento continues:

“Now, pegging free money and endless counterfeiting to a specific unemployment figure would be a brilliant idea if printing money actually had the ability to increase employment....

Continue reading the Michael Pento piece below...


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“The Fed recently celebrated the fourth anniversary of zero percent rates and massive expansion of its balance sheet.  However, even after this incredibly accommodative monetary policy has been in effect since 2009, the labor condition in this country has yet to show significant improvement.  Last month’s Non-Farm Payroll report showed that the labor force participation rate and employment to population ratio is still shrinking.

Goods-producing jobs continue to be lost and middle aged individuals are giving up looking for work.  This is the only reason why the unemployment rate is falling.  I guess if all those people currently looking for work decide it’s a better idea to stay home and watch soap operas, the unemployment rate would be zero.

But more of the Fed’s easy money won’t help because the issue isn’t the cost of money but rather the over-indebted condition of the U.S. government and private sector.  Keeping the interest rate on Treasuries low only enables the government to go further into debt.  And consumers aren’t balking on buying more houses because mortgage rates are too high.

The plain truth is this is a balance sheet recession and not one due to onerous interest rates.  More of the Fed’s monetization may be able to bring down debt service payments a little bit further on consumer’s debt.  However, it will also cause food and energy prices to be much higher than they would otherwise be. 

The damage done to the middle class will be much greater than any small benefit received from lower interest rates.  Therefore, the net reduction in consumer’s purchasing power will serve to elevate the unemployment rate instead of bringing it lower.

Rather than aiding the economy and fixing the labor market, what the Bernanke Fed will succeed in doing is to ensure his unshrinkable balance sheet will not only destroy the economy, but also drive the rate of inflation to unprecedented levels in this country.

Ben’s balance sheet was just $800 billion in 2007. It is now $2.8 trillion and is expected to grow to roughly a shocking $6 trillion by the end of 2015.  A few more years of trillion dollar deficits that are completely monetized by the Fed should ensure that our government’s creditors will demand much more than 1.6% for a ten-year loan.

The problem is that rising interest rates will cause the Fed to either rapidly and tremendously expand their money printing efforts, which could lead to hyperinflation; or to begin to sell trillions of dollars worth of government debt at a time when bond yields are already rising.

If yields are already rising due to the fact that our creditors have lost faith in our tax base to support our debt, just think how much higher yields will go once the bond market becomes aware that the Fed will become another massive seller.

The Fed’s new policy is incredibly dangerous and virtually guarantees our economy will suffer a severe depression in the near future.  For the reasons stated above, it is prudent to use the austerity threats emanating from the Debt ceiling and Fiscal Cliff as an opportunity to accumulate precious metals and their equities.  Once those issues are resolved gold should be the primary beneficiary.”

To learn more about Michael Pento’s financial management services CLICK HERE. 

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The interviews with MEP Nigel Farage, Chris Powell, Bill Fleckenstein, Egon von Greyerz, John Hathaway and Ben Davies are available now.  Also, be sure to listen to the other recent KWN interviews which included Stephen Leeb, Eric Sprott, Gerald Celente, James Turk, Michael Pento and Wilbur Ross by CLICKING HERE.

Eric King

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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,

rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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