Stocks Plunge as Fed Members Admit Endless Bond Buying Will Not Fix Economy

by Kurt Nimmo,  |  published on February 22, 2013

During the January meeting of the Federal Reserve, some members of the central bank admitted the obvious – a tidal wave of nearly worthless paper money will not turn the economy around and the Fed’s bond-buying program will create dangerous inflation and “foster market behavior that could undermine financial stability.”

Fed minutes reveal “a number of participants” in disagreement with the bond-buying scheme. An ongoing review of the practice “might well lead the committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labour market had occurred.”

The Fed is currently tossing around billions of fiat dollars every month in a scheme it insists will remedy the economy and put an end to massive unemployment. In January, the privately owned Fed said it would continue to buy $85 billion in bonds every month.

The program has resulted in a sharp rise in bond prices. Meanwhile, word of dissension at the Fed sent the stock market tumbling. The Dow lost 108 points while the Standard & Poor’s 500 index fell 18.99 and the Nasdaq composite index dropped to 49.18.

“Over the last several weeks, equity markets have been losing touch with reality and the news out of the Fed has been a trigger point for a selloff,” Stewart Richardson of RMG Wealth Management LLP in London told Businessweek. “Equity markets are being propped up by the Fed printing money, and they will come under pressure if this stops. In the big picture, this will be seen as a major development for markets.”

The government’s Labor Department added to the misery by reporting Thursday the number of Americans seeking unemployment benefits jumped 20,000 last week to a seasonally adjusted 362,000. Establishment economists remain buoyant, however, and predict things will look more cheery after the government massages the numbers.

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