Today one of the top economists in the world sent King World News an exclusive piece cautioning about the massive inflation present in the financial system and how destructive this is for citizens. Michael Pento, founder of Pento Portfolio Strategies, also warned the worst is yet to come as standards of living continue to be destroyed.
Pento: “Wall St. Pundits have summarily declared Ben Bernanke free from any wrongdoing regarding the negative effects derived from artificial interest rates and massive increase in the Fed’s balance sheet. Specifically, most market commentators now claim with certainty that the central bank’s unprecedented manipulation of markets has been done without creating any inflation.
This assertion is untrue in every aspect. Most importantly, the Fed’s quest to boost asset prices has been accomplished by creating credit by decree. In other words, Mr. Bernanke has purchased more than $2.5 trillion worth of MBS and Treasuries with newly manufactured money within the last five years alone….
“Therefore, there has already been $2.5 trillion worth of inflation that has been directly injected into mortgage and Treasury securities; and this number is still growing at a rate of $85 billion each month. This means the Fed is causing a tremendous amount of inflation to occur in bond prices. Banks have taken the Fed’s new money and purchased assets including equities, MBS and Treasuries, which in turn has helped push interest rates down to record lows.
Bernanke’s debt monetization has sent stock prices up 140% from their lows and also sent home prices rising 10.2% YOY on a national basis, according to the S&P/Case-Shiller Index. Inflation is very evident in stock values and has now even caused real estate prices to jump. This process of balance sheet expansion has caused the broad money supply M2 to rise 7% YOY. With real GDP growing at just 1.5-2% annual rate, the excess money growth is causing asset prices to rise.
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