Take away the Punchbowl!
($1T of annual money printing)
An interesting comment that I hear frequently relates in some way to the Fed "taking away the punchbowl" meaning that the Fed will eventually have to taper quantative easing, or end quantative easing, or begin to sell some of the assets on it's balance sheet, or even begin to increase the Fed Funds rate. The current Fed monetary policy (July 2013) has had several effects; robbing the saver, lowering Government borrowing costs, lowering consumer and corporate borrowing costs, inflating assets prices, creating what some people call the "Bernanke Put" for the equity markets, among others. This policy has also caused the Fed balance sheet to expand by more than 3X over the last 5 years to now over $3.5 Trillion. The current policy has the Fed buying $85 Billion in assets every month which comes to about $1 Trillion a year. Most people think that this policy cannot continue and hence the "taking away the punchbowl" comment is now the mantra of many media pundits.
Take away the Punchbarrel!
($5.3T-$6.6T of GAAP-basis Deficit spending)
What I feel these pundits are missing is that the Fed's punchbowl of $1 Trillion per year is small potatoes when compared to the Federal Government's punchbarrel of $5.3 Trillion of current U.S. "Real" Deficit (GAAP-basis) spending as estimated by the Comeback America Initiative ($6.6 Trillion of GAAP-basis deficit spending as estimated by Shadowstats.com for fiscal year 2012). The U.S. Federal Government is effectively spending 3.1X the Government's income with current period annual spending exceeding annual income by about $1 Trillion but with GAAP-basis Deficit spending in the range of $5.3 Trillion-$6.6 Trillion. I do not think it is a coincidence that the size of the Fed's punchbowl matches closely this $1 Trillion annual cash deficit. The Fed needs to keep the borrowing needs of the Federal Government from hitting the market and run the risk of interest rates rising significantly. It is my opinion that the Fed will not be able to take away it's punchbowl until the Federal Government takes some significant action to take away the punchbarrel! In fact I feel that unless the Federal Government starts to take away it's punchbarrel, the Federal Reserve will be forced to expand their punchbowl policy to accommodate what will be an ever increasing annual cash deficit that will eventually approach the size of the Government's punchbarrel ($5.3T-$6.6T). And the way USAPonzi works the Government's punchbarrel is growing exponentially and therefore the Fed's punchbowl will be forced to follow that same trajectory.
The Federal Government will eventually have to come clean with the U.S. citizenry and the world that they are running a massive Ponzi scheme and take the actions necessary to balance the GAAP-basis budget.
Next page: Robbing the Saver!