Letter: FED has me worried
“Central banks have created the illusion of growth that is based upon re-inflating asset prices and their ability to suppress interest rates.” — Michael Pento, president of Pento Portfolio Strategies.
What the Fed is doing, is hoping that a spark will happen and ignite the economy. If they can just keep pumping in huge amounts of liquidity ($85 billion a month presently), that sooner later those who that profiting most from this will start spending some it on creating economic growth. There as been some anemic signs that there is the tiniest spark taking place.
However, I am thinking about it this way, it is like somebody not knowing where the gas cap on their new car is and pouring gas on top of it, hoping it will seep in somewhere. A lot of risk with no idea if there is a chance for success. If something goes wrong, BOOM!
But of course there is already plenty wrong!
There is fire across the street, and the guy at the other pump is smoking, and it looks like going to flip the ashes in your direction and you’re down wind from him. So, it isn’t looking so good.
But if you are the Fed, there really are not a lot of alternatives, since you bought the car and you need gas to keep it moving. Your hands are tied so just keep pumping and maybe that gas gauge will move before you get blown up!
This is what central banks are doing around the world, pumping, pumping, and pumping!
Sooner later they figure somebody is going to spend some of that money and create jobs, not just use it to speculate in the markets.
Now, standing at the other pump, is that guy with the ashes to flip, smiling at you, with that “I don’t give a damn” look. Those are your market speculators.
Now, if you are the Fed, well, what are going to do? After all, you did buy the car, (economy) lock, stock and barrel.