Our Wile E. Coyote Federal Reserve

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Zero Hedge: Wile E. Coyote has gotten a bad rap: in all fairness, his schemes are ingenious, if overly complicated, and it’s not his fault that the Acme detonator misfires or the Road Runner doesn’t respond as predicted. Every set-up to nail the Road Runner should work. That it fails and leaves him suspended over the cliff for a woefully brief second to intuit his impending doom really isn’t his fault.

Wile E. Coyote and the Federal Reserve share a lot of similarities. Just as Wile is always trying to catch the Road Runner, the Federal Reserve and other central banks have been trying for 10 years to trigger a self-sustaining economic expansion, i.e. an expansion based on the self-reinforcing dynamics of increasing productivity driving increasing wages which then fuel consumption and investment in productivity, and so on. more  …

Opinion: A self-sustaining expansion, if it even exists, requires perpetually low or negative interest rates and periodic infusions of fresh new money.

If the economy were to weaken for various reasons, governments can make up shortfall by printing money and buying assets. Essentially that is what the US, EU, and Japan have been doing (off and on) since 2008.

Theoretically, the expansion could go on for ever. So what is the problem? First the money printing of 2008 was supposed to be temporary stimulus that would end once things got back to normal. It didn’t work.

So in 2011 we tried it again with the same results, and finally the third round in 2013 got the economy going again. It took $4,500,000,000,000 (trillion) to get the economy going again.

Like an addictive drug we now need more.

I can’t help but see the next round of money printing (QE 4) getting the same results as the one we did in 2008.

The Wile E. Coyote analogy is dead on.

The end result will be hyperinflation (Rev. 6:5-6) as one or more major currencies collapse.