Tag Archives: ben bernanke

The problem at the Fed is that long rates are driving higher – responding to the overall loss of confidence in the US government bond market – posing a risk to the balance sheet of the Fed – precipitating the need to launch QE3 to buy back lots of bonds and keep those rates low (the US is now the biggest buyer of US bonds, pulling ahead of China recently). So why not just reverse course and start raising rates? Why not just do a Volcker, take the hit, and rebuild? The answer is what I call the ‘Porcupine dilemma.’ Once swallowed, these low interest rates are not easily coughed back up. Contrary to Ben’s claim on “60 Minutes” recently, he can’t just gradually reverse course, start raising rates, and start recalibrating the economy in 15 minutes. No. The clue is in the debt needed to fund $1 of GDP that has gone from a – 1:1 ratio to a close to a 6:1 ratio – during the past two decades; i.e., the amount of debt that has been created is geometrically (astronomically) higher than the recent, simple, linear move down in rates would suggest. Ben has swallowed a porcupine. And there is no way this thing is coming out the way it went in. The only way forward is hyperinflation.

“I see hyperinflation ahead.”