Off the Cuff: It’s a Mad, Mad World

In this week’s Off the Cuff with Mish & Chris podcast, Chris and Mish set their sights on:

• The Fed
  • 0% interest rates through 2014 (at least!). There’s not even a pretense left now about whom its policies are really directed at helping.
• Europe
  
  • In the words of Shakespeare, the latest proposals are simply “sound and fury, signifying nothing.” At this point, a deep and prolonged recession is a certainty.
• Japan
  
  • Decades of can-kicking are coming to their limit. 2012 could well be the year Japan topples into crisis.

Recorded on Wednesday, this podcast features Chris and Mish tackling the parade of head-scratching news announced by various governments and central banks this week. It’s almost as if these entities are competing with each other for the Darwin Award.

The Fed

Yesterday, the Fed announced it would keep interest rates near 0% at least through 2014, as it is concerned that anemic economic growth in the US will continue for at least that long. 

Both Mish and Chris see this policy as counterproductive. Artificial and persistent low interest rates are a punishment to the middle class and those on fixed incomes. Who benefits? The banks. Banks now have an extended free license to plow leveraged money into Treasuries with no risk and recapitalize their cruddy books at the expense of the taxpayer.

Mish and Chris find it hard to not get cynical here. Yesterday’s announcement is difficult to take any way other than that our country has decided that bailing out the 1% is its #1 priority. Expect more and more downgrades to projected economic growth to come over the next few months — which, of course, will only provide further claim that these steps are needed.

On top of that, the proposed FHA homeowner bailout plan in President Obama’s State of the Union speech is another example of how the responsible are punished and the irresponsible are assisted. Our country is making it clear it will reward moral hazard — whether perpetrated by corporation or consumer.

No wonder precious metals have spiked over the past 24 hours…

Europe

The ECB also trying to change the rules, doing everything it can to protect bondholders from losses.