Ben Bernanke, Bankers' Friend; QE3 Sends Stocks Screaming Higher, Oil, Gold, Silver Rally

After the German Constitutional Court OK'd the ECB's ESM (love those acronyms!), Thursday was set up for a real bazooka blast of fresh money-printing by Fed Chairman Ben Bernanke.

And, of course, the chairman did not disappoint, announcing an unlimited bond buying scheme, whereby the Federal Reserve would commit to buying $40 billion per month of MBS (Mortgage-Backed Securities) for a time period that the chairman left open-ended.

According to the FOMC statement: "If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability..."

The FOMC statement also extended ZIRP (Zero Interest Rate Policy) through mid-2015, another easing which mostly benefits banks, which can borrow at 0-1/4%.

The Fed's move was - and will be - huge, providing liquidity and a lifeline to the banks by sopping up their horrendous MBS, which are almost all underwater, spoiled or otherwise non-performing.

A move of such scope cannot be underestimated for its overall effects to the larger economy, not only in the US, but globally. The world is already awash in US dollars, and these policy actions only exacerbate that situation. In response, the Euro has galloped ahead, trading in excess of 1.31 to the dollar.

Markets all popped, with the Dow at its highest level since autumn of 2007 and now within shouting distance of its all time high, along with the S&P.

It is absolutely amazing that stocks can be artificially propped up due to actions from the public sector, but there is a downside to consumers in the form of higher prices, especially in food and fuel. Gasoline at the pump is nearing $4.00 per gallon nationwide. The average price of a gallon of unleaded regular is now $3.87.

The Fed believes that even with their massively-inflationary policies that inflation will remain below two percent. They must be dreaming, because the price of oil, tied directly to gas and home heating fuel, continues to rise and should continue to do so in the months ahead.

That will effect all consumer prices on everything that needs to be shipped, trucked or transported, which is just about everything except food you grow in your own back yard and items you make at home (depending on where you buy raw materials).

Good-bye Mitt Romney; hello second term for Obama. The election, thanks to the Fed, should be a slam-dunk for president Obama and likely will result in congress continuing to be split, with Republicans ruling the House and Democrats the Senate.

Great. More deadlock from the pols, higher prices for everything, more riches for bankers, a weaker dollar (in just the past two weeks, that European vacation rose in price about 10%) and no way to save unless you buy hard assets, gold and silver.

The status quo remains print, print, and print some more. The middle class is being squeezed out of existence. The big hope is that the Fed will sop up so much of the horrid MBS out there that they will bankrupt themselves and someday the US will return to sound money, though that scenario is probably a few years away.

In the meantime, enjoy. Spend. The Fed and the government have your back with unlimited public spending, a new, higher federal debt ceiling (coming soon and monetized by the Fed) and fiat money out the wazoo.

It's the grandest clusterf--k of monetary policy and make-believe debt-funding in the history of the world.

Dow 13,539.86, +206.51 (1.55%)
NASDAQ 3,155.83. +41.51 (1.33%)
S&P 500 1,459.99. +23.43 (1.63%)
NYSE Composite 8,407.03, +139.71 (1.69%)
NASDAQ Volume 1,884,013,625.00
NYSE Volume 4,616,279,500
Combined NYSE & NASDAQ Advance - Decline: 4230-1321
Combined NYSE & NASDAQ New highs - New lows: 598-27 (flashing red light extreme)
WTI crude oil: 98.31, +1.30
Gold: 1,772.10, +38.40
Silver: 34.78, +1.49