It is well worth checking out Yellen’s comments at the recent symposium, sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming.
However I would draw your attention to one particular section.
- In the simulations reported by Reifschneider, “Gauging the Ability of the FOMC to Respond to Future Recessions,” in note 8, overcoming the effects of the zero lower bound during a severe recession would require about $4 trillion in asset purchases and pledging to stay low for even longer if the average future level of the federal funds rate is only 2 percent.
In essence what this is saying is that if the Federal Reserve can raise rates to 2% then QE of $4tn will be required, however we know that is not possible. Should the interest rate remains lower than this figure then we will see QE increase exponentially. What is now absolutely clear is that the Federal Reserve will have to hyperinflate their own balance sheet, no matter what the outcome. Stone cold reality is written right before our eyes. The reason for owning Gold and Silver could never be more clear.
Upon reflection the markets reacted in the appropriate manner on Friday when it clearly realised that Yellen has no intention of raising interest rates in September with clear reference to the expansion of asset purchases, namely QE. We have now been conditioned to believe that QE is acceptable monetary policy and to expect enormous expansion of such policy in the future. The question is, what else is left to purchase?
In summary the only question that remains is how much longer can political commentators, economists, analysts and the mainstream media continue to deny the obvious with respect to the Federal Reserve, especially given it is written in the footnotes of Yellen’s speech last Friday. Central bank policy has been an abysmal failure and was utterly flawed from the moment they entertained the idea of long-term QE and ZIRP/NIRP policies.