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IPFS News Link • Federal Reserve

QE2: The Road to a Gold Standard

THREAT OF USDOLLAR CRISIS The Bernanke USFed is on the road to triggering a USDollar panic, a run on the buck. The USEconomy can become more competitive if the USDollar declines hard and worker pay scales fall hard. In the view of many, QE2 then QE3 will present two alternatives, rabid price inflation or USTreasury debt default. A QE3 program is guaranteed by the chronic federal deficit in excess of $1.5 trillion. Even the usually compliant Wall Street Journal has been opposing USFed policy, with dire warnings of deep USDollar devaluation, debt downgrade, and hefty labor wage cuts. Higher USTreasury Bond yields are the currently ignored flashing signal, hardly what Bernanke promised over a year ago when QE1 was launched, and hardly what he promised when QE2 was launched. But then again, he has been wrong about the housing market, the mortgage market, the economic recovery, nascent price inflation, bank stability, a housing recovery, and just about everything. Serving as Secretary of Inflation, he manages the money creation diligently and liquidity facilities with such aplomb and dexterity. Thus he is revered. Unlike the Great Depression, for which he is a revisionist history expert, massive price inflation has begun to accompany the hyper-inflation on the monetary side. Bernanke was selected as the dumb professor in residence, the bag holder, the obedient lackey, and idiot savant. My forecast is for both rabid price inflation and USTreasury debt default, the former in spades at this moment and the latter in due time. If the USDollar declines significantly more than what it did in the 2000 decade, and worker wages fall to more competitive levels, then to be sure the US labor market would find itself more in line with foreign worker wage levels. A stimulus would be felt, but at a great cost. The price inflation effects would be powerful, while the lower income purchase power would aggravate the price effects in a profound double whammy. US households would feel an introduction to the Third World of poverty.

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