The Fed “IS” the Problem!

The link enclosed is a very good article on the Fed's casino behavior.  As a point of reference, Lehman Brothers' leverage ratio was 30:1 prior to its collapse in 2008.  The Fed's leverage ratio is currently 80:1.  The Fed has now become the world's most leveraged hedge fund, completely antithetical to its official mandates.

The rationale for the existence of central banks is price stability and protection of the soundness of its issuing sovereign currency.  The Fed added an official mandate of "full employment" (whatever that metric is).  The latest unwritten mandate is to artificially levitate financial markets to prevent the insolvent banking system from imploding.

But the Fed has backed itself into a corner, because its monetary stimulus has failed to revive an economy on life support.  QE is pushing on a string, with limited results--and worse, with increasingly negative consequences as the western economies are in the throes of a debt trap.  More debt begets more debt, which dampens economic growth.  All QE has done is add more toxic liabilities on to the Fed's balance sheet.

Households suffocating from huge debts don't take on more debt; they cut spending while lenders stop lending to them.  Yet, the US government continues on its spending and borrowing binge.  The Fed has reached its monetary cul-de-sac, and it's only a matter of time before the bond vigilantes attack all fiat currencies issued by over-indebted (or insolvent) governments.  The dollar, while being the cleanest shirt in the dirty laundry bin, won't be the only target.

Google how George Soros single-handedly destroyed the British pound sterling in 1992, as he shorted the currency on a bet the UK would devalue the pound, due to high inflation, high deficits, and relatively low interest rates.

http://blog.milesfranklin.com/the-fed-is-the-problem