US Federal Reserve Admits "We're In Deep Shit"!!!!

In an astonishing move, the US federal reserve just decided not to start "tapering" its monetary heroin to the US financial system.   They have been providing $85 billion of QE to the US Treasury and Mortgage Bond markets for the last year, and it was widely marked up that they would start to remove or taper this support by around $10-15 billion a month from this meeting.

The amount of money printing they have been undertaking for the last 5 years is astronomical and unprecedented.  Today's decision shows just what a mess the US financial and also global financial system is now in as a result of this policy being conducted at such a scale for such a prolonged period.  They now clearly believe that even removing this $10-15 billion - which is peanuts compared to the overall size of the US economy - would be like putting a heroin addict through cold turkey.

The US economy has been growing if slowly, and unemployment has been falling.  With interest rates, in the US, still at decades low levels, if they don't feel they can move now, having led the markets to believe they were going to act, then they must have decided that the US financial system is essentially bankrupt, and would collapse if they even removed this small amount of liquidity.

In the moments after the announcement, share prices rocketed, showing just how much asset markets are in massive bubble territory inflated by this money printing.  But, Gold spiked on fears that this continued money printing means inflation down the road.  The likelihood is that when this decision is digested, it will have a very bad effect on financial markets, whatever the immediate response.

If the US financial system is in this deep shit, then that must manifest itself sooner or later.  That might happen as a result of the current renewed political crisis over the Budget and Debt Ceiling.  The potential of rising inflation means that along with gold buyers, bond buyers will begin to wonder about continuing to receive yields below inflation.

This is likely to end very, very badly.