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Dow Drops 100 Points On Hints Of Ending QEIII

From CNN’s Money.com:

Dow sinks 100 points on Fed minutes

By Ben Rooney | February 20, 2013

NEW YORK (CNNMoney) – U.S. stocks ended lower Wednesday after Federal Reserve meeting minutes raised worries the central bank might scale back its bond buying program.

The Dow Jones Industrial Average fell 108 points, or 0.8%. The S&P 500 fell 1.2% and the Nasdaq lost 1.5%.

In case there was any doubt as to why the stock market had been skyrocketing.

By the way, no where in this lengthy article is it ever mentioned that the Federal Reserve is currently pumping $85 billion dollars a month into the financial markets. Maybe CNN doesn’t want its low information readers to realize that $85 billion dollars in ‘cuts’ in a year is not so much money after all.

Following its January meeting, the Fed’s Open Market Committee said the central bank would continue buying bonds and keep interest rates near zero until the job market improves "substantially." But the minutes from that meeting showed that some Fed officials were in favor of slowing the purchases sooner.

According to the minutes, "a number" of committee members argued that an ongoing review of the controversial program "might well lead the committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred."

After all, the elections are over.

Steven Ricchiuto, chief economist at Mizuho Securities USA, wrote in a note to clients that the minutes illustrate the Fed’s "discomfort with being involved in non-conventional policy." …

What is so non-conventional about propping up the economy so that a Democrat President can get re-elected? They have done things like this in banana republics for years.

"Investors are having a gut check, so to speak, as to whether these levels are justified," said Bruce McCain, chief investment strategist at Key Private Bank.

The latest economic data have been positive, but not strong enough to live up to investors’ high expectations, he added…

Er, the GDP contracted in the last quarter. Under Bush a contraction in a single quarter was officially declared to be a recession. (Even if they had to re-define the term.) But under Obama such data is "positive."

Gas prices rose for the 34th day in a row, fueling concerns about whether higher prices at the pump will take a bite out of consumer spending in February. Nationwide, a gallon of unleaded gasoline averaged $3.766 Wednesday, according to AAA. Gas prices have risen 34 cents, or 10%, since the beginning of February…

And we all remember how such news was covered during the Bush administration. But that was then, and this is Obama.

This article was posted by Steve Gilbert on Thursday, February 21st, 2013. Comments are currently closed.

One Response to “Dow Drops 100 Points On Hints Of Ending QEIII”

  1. Petronius

    The US economy is currently sputtering along based almost entirely on financial engineering by the Fed.

    GDP would be negative without the massive QE and government spending. This Fed money creation is what is fueling GDP and stocks. But even with all this action, GDP is not going up. In fact, GDP went down last quarter. This shows how weak Nerobama’s economy really is.

    The bond market is being totally manipulated by the government. The Fed is printing money like crazy to buy Treasury bonds, printing money at the rate of $85B each month.

    The Fed has become the biggest buyer of US bonds in the world, making it the largest holder of US government debt. It’s Treasury holdings are nearly $2T and have risen 260% in the last four years. In 2013 the Fed will buy another $1T in US public debt.

    We are creating endless debt and then buying our own debt. And it’s getting worse. In Feb the Fed will buy 75% of the new 30-year debt.

    When unfunded liabilities are included, the US public debt is now $86T. A country with $16T GDP can never repay that much debt in today’s dollars. It’s impossible. It can only be repaid through money printing and depreciation.

    As spending and QE continue, the value of the US dollar will fall. This will eventually lead to ruin.

    If today’s US stock market were priced in gold or Swiss francs instead of US dollars, it would show tremendous losses over the last decade.

    Thirty-eight countries, including the USA, are currently pursuing zero or negative interest rates. These countries are competing with each other to see which country can depreciate it currency the most. This cannot last.

    You can’t issue unlimited debt and maintain zero interest rates forever. At some point the Fed’s house of cards has to fall and the bond vigilantes will force interest rates to rise. US interest rates have already started to rise, and when interest rates begin to rise in earnest, the economy will slow and decline. So will the bond market and stocks; the values of securities will be destroyed.

    The long-term thesis for gold and silver remains intact Gold will continue to act as the anti-establishment currency. It will gain in value relative to the fiat currencies of over-levered nations, which are printing money in order to endeavor to maintain the living standards of their cash strapped citizens.

    At some point people will lose confidence in paper money and paper assets.




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