The Fed Wants You To Beg For QE3Brandon Smith
Sep. 28, 2011
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The psychological effects of the Dow are undeniable. When the average investor or even consumer sees green, life is good, even if every other indicator in the economy clearly says otherwise. For the common Dow lemming, “green” supplants reason, mathematics, instinct, and blatant logic. If mushroom clouds came in that particular shade of bull market green, nuclear holocaust would be welcomed with beers, barbeque, and jubilee. Green in the Dollar Index is no different. Many market joyriders and MSM parrots decree victory for Team Dollar without even a remedial understanding of the implications of dollar strength being measured against multiple faltering currencies across the globe. Just because the Euro, for instance, is nearly as superfluous as the greenback, this does not mean the dollar is a stable or healthy currency by default. They are BOTH screwed. But hey, as long as that little ticker points up, all is right with the world……right?
Red is the ultimate party stopper. Red makes Americans pause and reflect. It makes them question their economic sensibilities, their political loyalties, their futures, perhaps even their choice of marriage partners or favorite football team. The sight of red in the Dow brings to mind thoughts of recession, depression, collapse. At bottom, red makes our government and the people charged with safeguarding U.S. financial good-time-tootie-fruitiness look bad. Red?! Red?! Vote the bums out!
Given this American predisposition to ignore all other indicators except the Dow and sometimes the DXY, you can imagine why the private Federal Reserve in tandem with the U.S. Treasury has focused so much of their attention on stimulus measures designed to keep these two indexes predominantly in the green since the derivatives crash of 2008. They have done this through direct and indirect injections of fiat into market systems which have acted as a buffer; multiple yet temporary patches in the hull of a scattershot ship on the verge of being swallowed by the voracious waters of the briny deep. The problem is, after over three years of this activity, the opiate of fiat is starting to lose its euphoric aftertaste. Like some dirty track-marked heroin fiend, the U.S. economy is now nervously scratching its rancid fiscal sores and screaming for more of that sweet sweet fiat juice. The more we get, the more we need later down the road to satisfy our dependency.