BUY BUY BUY was the reaction from Wall Street overnight as Bernanke confirmed widely held expectations that the Fed is preparing for another round of QE. Bankers from all over the globe scuttled down from their ivory towers to attend the Fed’s annual retreat at Jackson Hole, Wyoming on Friday. Bernanke’s speech, longwinded as usual, provided the odd nugget of info, triggering the rally in equities - The Federal Open Market Committee “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly”

No ifs or buts, the outlook will deteriorate, QE2 is a given. Bernanke will be printing up dollars for treasuries, swapping treasuries for MBS, perhaps the commercial real estate market needs a hand up too.  Whatever it is that turns up on the Fed doorstep, consider it sold - sold way above market value. Not a bad friend to have, Ben Bernanke.

"We have Bernanke who is running the Federal Reserve who does not know what he is doing. We have a very serious problem on our hands and it's gotten much much worse. The man is taking $400 billion on to the Federal Reserve balance sheets – of dicey loans, bad debt. I mean he is turning the Federal Reserve into a pawn shop. You have something bad that you cannot sell, take it to the Federal Reserve. He'll lend you treasury bonds against it. Some day somebody has to pay for this and you know who this somebody is – my little girl, you, me. I mean it's gonna be the American taxpayer that's gonna have to pay for this. And it's gonna cause many many many more problems for the American economy for all of us."

- Jim Rogers

A government always finds itself obliged to resort to inflationary measures when it cannot negotiate loans and dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following if it reveals too soon the financial and general economic consequences of that policy. Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed; and so in this sense it can be called an instrument of unpopular, that is, of antidemocratic policy, since by misleading public opinion it makes possible the continued existence of a system of government that would have no hope of the consent of the people if the circumstances were clearly laid before them. That is the political function of inflation. When governments do not think it necessary to accommodate their expenditure and arrogate to themselves the right of making up the deficit by issuing notes, their ideology is merely a disguised absolutism.

- Ludwig von Mises

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