Yesterday the Federal Reserve announced that it was planning on injecting ANOTHER $600,000,000,000 (that's 600 billion dollars!, in case you were wondering) into the American financial system by purchasing Treasury bonds. The stated goal is to drive interest rates lower and encourage borrowing. Call it a top-down method of "stimulating" the economy. And you guessed it, they'll PRINT it!
Investopedia defines Quantitative Easing:
http://www.investopedia.com/terms/q/quantitative-easing.asp
--What Does Quantitative Easing Mean? A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.
--Investopedia explains Quantitative Easing...Central banks tend to use quantitative easing when interest rates have already been lowered to near 0% levels and have failed to produce the desired effect. The major risk of quantitative easing is that although more money is floating around, there is still a fixed amount of goods for sale. This will eventually lead to higher prices or inflation.
YES it will !!! Our problem is NOT high interest rates, they're already near historically low levels. Our financial problems are many and have political origins, like the government-induced home mortgage meltdown, ObamaCare, the looming threat of tax hikes and over-regulation, increased energy taxes via "Cap and Trade" legislation, forced unionization via "Card Check" legislation, and the list goes on. The ability to borrow money isn't nearly as problematic as the menace of abusive governance.
So what's likely to happen when $600,000,000,000 brand spanking new $dollar bills$ are injected into the American economy?
Inflation. And if we're terribly unlucky, hyperinflation. Think Weimar Republic, Germany, circa 1924.
Our economy will be awash with 600 billion more dollars chasing the same goods and services as before this second round of "quantitative easing." The cost of everything you buy is going to increase, maybe even dramatically. The current fight over extending the Bush tax cuts will seem like a silly side show once that $2.65 loaf of bread becomes $9.12, or a pound of hamburger goes fom the current $3.25/lb. to $13.50/lb..
This sort of inflation is the unkindest tax increase of all due to it's size and scope and the dramatic way that it impoverishes us and diminishes our lifestyles.
Think about it!
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jingo, I'd thank you for this excellent explanation but all it's really done is scare the @#$(*&@#$(&*@$ out of me! :-)
ReplyDeleteOther countries are warning us about this step BUT our Obama and his bunch know better (oh, my God) and we're in their hands and...oy.
I'm going to start buying a few extra cans of food at the store every time I go; I don't have a wheel barrow to use for when it costs thousands of dollars for a can of Spaghettios! have a great SUnday, Jingo...
Z, it's almost as though these idiots were TRYING to sink the economy. We can only defy the economic laws of gravity for so long, then the bill comes due. We have no other TRUE choices left but to--
ReplyDelete1. Cut spending significantly
2. Stimulate the economy via corporate and individual tax cuts, and cuts in regulation
Other than that, ALL these fools are doing is long term DAMAGE!
Do you have a garden? That's a good idea, and purchasing commodities. At least your money would keep up with inflation.
When hyperinflation sets in, don't people turn to a demagogue for a leader? Just asking.
ReplyDeleteAddendum....One of the first rules of economics: Don't print money that's not backed.
ReplyDeleteAnalogy: If you write a check with no money in the account, the check is no good.
"..it's almost as though these idiots were TRYING to sink the economy.."
ReplyDeleteThey are--and have been for the last 60 years--we - thanks to bho- and his minions- are FINALLY waking UP!
Carol-CS
yes my friend the Commies only want their own pockets full so they can fly to India and spend 200 mil a day!!!
ReplyDeleteAOW:
ReplyDelete"When hyperinflation sets in, don't people turn to a demagogue for a leader? Just asking."
Yes! Very good point. I liked your analogy and addendum also. My good buddy Dave Nalle wrote an interesting piece about the Federal reserve, I hope you like it.
http://jingoist-foundingprinciples.blogspot.com/2010/06/dave-nalle-on-federal-reserve.html
Carol, I HOPE people are waking up to the larger agenda. It's hard to shake the feeling that purposeful damage is being done. I've written at length about the Cloward and Piven Strategy of planned economic destruction. The concept is simpl enough, the ugliness of it is hard to grasp.
WHT, this guy BELONGS in the home of the old Oriental potentates. They were perfectly happy squandering the hard-earned wealth of their subjects!
What does quantitative easing mean? Simple, it means that the Fed will finance whatever the current deficit is financing.
ReplyDeleteSo the American suckers just spent another bundle on the Afghanistan fiasco and Wall Street bonuses.
"We believe, like the Spaniards in the 16th century who pillaged Latin America for gold and silver, that money, usually the product of making and trading goods, is real. The Spanish empire, once the money ran out and it no longer produced anything worth buying, went up in smoke. Today’s use in the United States of some $12 trillion in government funds to refinance our class of speculators is a similar form of self-deception. Money markets are still treated, despite the collapse of the global economy, as a legitimate source of trade and wealth creation. The destructive power of financial bubbles, as well as the danger of an unchecked elite, was discovered in ancient Athens and detailed more than a century ago in Emile Zola’s novel “Money.” But we seem determined to find out this self-destructive force for ourselves. And when the second collapse comes, as come it must, we will revisit wrenching economic and political tragedies forgotten in the mists of history."
--- Chris Hedges
Duckster:
ReplyDelete"So the American suckers just spent another bundle on the Afghanistan fiasco and Wall Street bonuses."
Wars--whether you think they're justified or not--are a valid and constitutional use of taxpayer's money.
Taxpayer Wall Street bonuses SUCK on steroids and belong to Bush, and to an even greater extent OBAMA and his Goldman-Sachs goons in his administration. After all they gave us TARP! If those bonuses were actually earned, we have no business commenting.
The truth is that you only touched on ill-informed leftist talking points which constitute a tiny fraction of spending, the discretionary portion.
The BIG expendetures are mandatory AND unconstitutional:
1. Social Security
2. Medicare and Medicaid
Vent your spleen until your heart's content about war, that's NOT the big expenditure. The UNCONSTITUTIONAL leftist programs are breaking the bank and WILL impoverish America if they're not seriously addressed very soon.
I don't have a vegetable garden, Jingo, I sure do wish I did.......I have friends who are stocking up on canned goods, etc......mostly because we live in earthquake country but now I'm thinking it's a good idea in general to get as much as we can before the wheelbarrows of money for a loaf of bread hit. Who'd have thought this would happen in America?
ReplyDeleteZ: "Who'd have thought this would happen in America?"
ReplyDeleteUntil the events of the last 27 months, I certainly didn't. This is a GOVERNMENT induced crisis, and like all of the crisis' before, this radical isn't wasting the opportunity to impose his damage.
Thanks a lot for this link, Jing. And yes, I do believe they're trying to destroy our economy, but this whole thing sounds like huge VAT (value added tax) to me, at the very least; systematic destruction of our economy at worst.
ReplyDeleteAnd Duck, if you & your leftist friends are so concerned about spending, why the @#$% do you all support our Gov't buying health care for all of North America?? Now THAT's spending we'd co well to cut.
Heaven, help us.
Thanks for stopping by Susannah!
ReplyDeleteI've never thought of QE1 0r QE2 as a VAT tax, although it most certainly is a "tax." Any time the government does something that costs you money, it is a tax; no matter what the hell they're calling it. And QE2 is going to cause long term trouble, and it's going to hurt!
God help us is right...
"I've never thought of QE1 0r QE2 as a VAT tax"
ReplyDeleteWell, of course it's not - technically. But if you're gonna get hosed by inflation every time you buy something & the Gov't's the one who imposed the hosing...
Point taken. They MUST stop the tampering and let things happen, rather than continuing to artificially prop up the economy with an ever-growing debt to countries like CHINA!
ReplyDeleteThe coming crash can be mitigated--or maybe possibly avoided--by taking a few simple steps that big government totalitarian leftists are LOATHE to do:
1. Cut spending significantly
2. Stimulate the economy via corporate and individual tax cuts, and cuts in regulation
3. Implement the FairTax.
4. Repeal almost every piece of legislation enacted in the last 28 months.
The last two fall under the heading "Pipe Dreams."
Will you run for President in 2012? Please?
ReplyDeleteJing for PRESIDENT in 2012!!
ReplyDeleteLOL! Now that's some funny stuff Susannah!
ReplyDeleteThere are FAR to many skeletons in my closet to pass muster. :-) But thanks for your vote.
Its over for Obama. He doesn't know it yet but it is lights out. The question is if he figures it out how much of a mess will he leave for us to clean up.
ReplyDeleteI hope you're right Beak.
ReplyDelete