Lear Capital Review: The Successful Failure of US Money Printing

Bill Bonner of the Daily Reckoning never minces words. This is again one of those times. Here’s what he said today:

“Yes, dear reader, there are some options you’re better off without. Printing money – with nothing to back it – is one of those things.

But wait. You say the Fed’s money printing (otherwise known as QE2) has been a success? Think again. We’ve been saying for months that it won’t work. Now, even the mainstream press is catching on. Here’s the latest report from The Wall Street Journal (MarketWatch):

BOSTON (MarketWatch) – It’s cost $600 billion of your money. And it was supposed to rescue the economy. But has Ben Bernanke’s huge financial stimulus package, known as “Quantitative Easing 2,” actually worked as planned? QE2 is being wound down in the next few weeks. Fed Chairman Ben Bernanke has said it has left the economy “moving in the right direction.”

But an analysis of the real numbers tells a very different story.

Turns out the program has created maybe 700,000 full-time jobs – at a cost of around $850,000 each.

House prices are lower than before QE2 was launched. Economic growth is slower. Inflation is higher.

Yes, it’s sparked a massive boom on the stock market. Ordinary investors have started piling back into shares again. And last week we saw the latest example of the return of animal spirits on Wall Street, as stock in new dot-com LinkedIn skyrocketed on its debut.

But even the stock market boom hasn’t been what it appears. An analysis shows that most of the rise in the Standard & Poor’s 500 Index under QE2 has simply been a result of the decline in the dollar in which shares are measured.

The truth? QE2 has created a massive new bubble in dollar-based financial assets, from stocks to gold. Meanwhile, it has had zero visible effect on the real economy.

Take jobs. According to the US Labor Department, since last August the number of full-time workers has gone up by just 700,000, from 111.8 million to 112.5 million.

At a cost of $600 billion, that’s $850,000 a job.

The picture’s even more meager. Over the same period, the number of part-time workers has gone down by 600,000. In other words, we’ve basically shifted 600,000 or 700,000 workers from part-time jobs to full-time jobs.

The percentage of the population in work is actually lower today – 58.4%, compared to 58.5% last August. The percentage of the workforce in actual work, the so-called “participation rate,” has fallen by half a percentage point.

Some recovery.

Right. Some recovery.”

I’m in agreement with Bill. It’s not just a failure of money printing – it is a failure in money printing! I do disagree with the Market Watch writer on one point. Physical gold is not in a bubble. Paper money is in a bubble nearing a pop and physical gold and silver (real money) and their potential meteoric rise in value is a RESULT of the bursting of the paper money bubble. THAT must be understood! Like to discuss it further? Call us today at Lear Capital !