Coordinated central bank intervention on top of everything done so far suggests panic. Things are worse than they seem. Bernanke, Draghi, and BoE's Mervyn King are scared stiff. Policy appears to be do something, anything, no matter how long the odds. Hail Mary attempts usually fail.
Few expected an open-ended Fed pledge to buy $40 billion worth of mortgage bonds monthly and continue Operation Twist. Officially it's called the Maturity Extension Program.
It exchanges short-term debt for longer maturities. In theory, it's to lower interest rates on 10-year Treasuries. It also represents QE without printing more money and thereby dampens inflationary pressures.
For how long in an environment of money madness. Official numbers mask its high level. Based on 1980s model, Shadowstats estimates around 9%.
Everyone who eats, drives a car, heats and/or air conditions a home, has health insurance and other medical expenses, and/or pays tuition bills knows inflation is high and rising. Household budgets are sorely stressed.
Lloyds TSB Bank analyst said Bernanke was true to his "Helicopter Ben" reputation. Pimco's Mohamed headlined his Financial Times op-ed "QE 3 is a sign of the Fed's policy purgatory," saying:
"(T)he Federal Reserve confirmed on Thursday that it is operating in policy purgatory: incapable of delivering the good economic outcomes it desires, yet unable to exit from an experimental policy stance that risks a widening array of collateral damage and unintended consequences."
Previous actions failed. Economic conditions may be worse than most think. On August 31, Bernanke cited "daunting economic challenges."
He expressed "grave concern" about high unemployment. He knows headline U 3 deception masks its severity. Youth unemployment is dangerously high. Workers leaving the labor force in huge numbers shows how bad things are.
Monetary policy is the only game in town. Political Washington force feeds austerity with much more coming. Conditions aren't uncertain. They're awful and heading south.
Fed policy suggests panic mode. Will anything it does help?
"History and detailed analyses of the problems underpinning America's prolonged economic malaise suggest these well-intentioned measures will again fail to secure a much better economic situation."
"This is also behind the widening gap between economists urging the Fed to do even more and those favoring less."- Advertisement -
At the same time, Bernanke said "monetary policy cannot by itself (deliver) what a broader and more balanced set of economic policies might achieve?"
They're absent. Fed bullets haven't worked so far. Increasingly they're delivering less bang for the buck. They're treading water, buying time, and as far as the eye can see "in policy purgatory" until the whole house of cards (Greenspan and Bernanke built) collapses. They've only got themselves to blame.