The US Federal Reserve's dirty little secret

Bernanke is strutting around like a peacock these days and has even had the balls to start tapering his QE.  While fools and idiots have referred to this as "unwinding the QE", the term unwinding means selling positions, not just buying more of the same positions at a 12% slower pace.  Bernanke hasn't unwound anything nor does he appear to be planning to.  His tapering theater was accompanied by promises that he will keep rates near zero well past reaching 6.5% unemployment.

But that's not the dirty secret my post title was referring to.  No, I was more referring to the fact that Bernanke is acting like he is the head of the central bank of the US when in fact he is the central bank of the whole world.  He proved this in spades back in 2008 and 2009 when he loaned money to almost every country in order to keep them from collapsing.

So while Bernanke keeps the herd from panicking by not mentioning this important fact, the rest of the world continues to meet with great stress.  At some point they will all collapse again and Bernanke won't have the stroke to bail them out like he did last time.  You can see how countries are trying to change the subject as loudly as they can.  Take for example, the arrest of an Indian diplomat for allegedly failing to pay a fair wage to her housekeeper.  This is starting to blow up into a much bigger deal than anyone would have expected.  Sure, the cops abused that woman.  But our cops are used to that.  The victim said that they strip searched and cavity searched her multiple times.  At no time should the police be allowed to stick their hands up someone's ass and vagina if they have not committed any violent crime.  It's pure sexual abuse, fully condoned by the government.  So yes, it was an outrage.  But normally the cops get away with doing whatever they want.  This time something is different.  This time, the Indians need something to distract from their own failing economy.

And what about China?  Well, The Daily Reckoning (smart guys over there IMO) reported that China just had to make an emergency injection of cash in order to prop up its banking system in response to an unexpected surge in interbank lending rates.  That same article claims that China's total debt to GDP is about 200% today.  So they have really had to lend and borrow a ton of money in order to keep the Chinese Miracle from coming off the rails.  France is swirling the bowl and Germany is starting to look very weak as well.  And of course Japan is still a bug in search of a windshield.  It is creating new secrecy laws and reforming its military.

Bottom line: Bernanke and his cohorts can be as slick as they want to be but at the end of the day the world is one huge, stinking, interconnected debt Ponzi and the US cannot just sit back and watch any major player implode.  They will have to intervene.  So all the statements Bernanke is making about our economy are really meaningless with regard to monetary policy because the monetary policy of the US is not the weakest link.  What will likely take us down at the end is the chain reaction of collapsing Ponzis starting with the marginal players and then "spreading" like contagion. Of course, that is like saying that the guy with a cold is going to make the guy with terminal cancer get sick.