Bernanke’s Quantitative Easing: Wrong Medicine for an Ailing Economy

rightsidenews.com ^ | Sep 14, 2012 | J.D. Foster

[KeyLargo]

Bernanke’s Quantitative Easing: Wrong Medicine for an Ailing Economy

Friday, 14 September 2012 08:40 J.D. Foster

The Federal Reserve’s Open Market Committee announced today that it would pursue $40 billion in additional monthly stimulus in the form of quantitative easing. Meanwhile, it will maintain its previous program of exchanging about $45 billion monthly in short-for-long-term securities. Quantitative easing, or QE, is purchasing long-dated government bonds and similar debt instruments. » If you like this article, please donate to Right Side News Daily

The policy is certainly well motivated: The U.S. economy is barely growing, as the latest jobs report underscored, predominantly because of severe regulatory and fiscal uncertainty. Under the circumstances, while Federal Reserve Chairman Ben Bernanke’s urge to “do something” is understandable, even commendable, the economy would be better off today—and in years to come—if he were to remember the expression “when you’re stuck in a hole, stop digging.”

[KeyLargo]

"The real problem with QE—beyond increased near-term uncertainty—is that the Fed must at some point unload all these bonds it has bought. The Fed will buy bonds in soft markets and sell them when interest rates are already rising, pushing interest rates up further, faster. The problem, in short, is that the Fed will have failed to prop up the economy when it was weak only to risk killing the recovery once it really takes off. This is the outcome to which former Senator Phil Gramm and Professor John Taylor of Stanford refer in their column, “The Hidden Costs of Monetary Easing,” in the September 12, 2012, Wall Street Journal."

Bernanke did his job as ordered by Obama to put the money printing presses on warp speed in order to get Obama re elected.

I used to listen to Bob Brinker and his financial program on Sunday afternoons AM radio.

After yesterday Brinker praising Bernanke for his courage in saving America I almost puked.

Brinker is in the business of selling municipal bonds and cuts off any callers that question why they should buy municipal bonds when all of these big cities are going bankrupt.

[who_would_fardels_bear]

It’s the perfect medicine ... if the intent is to shuffle off the bad debt owned by the speculators onto the U.S. taxpayer.

[Pearls Before Swine]

The type of medicine you apply depends a bit on what you want for the patient. Sometimes heroic treatment is warranted. At other times, the only doctor around will provide “palliative care,” which is aimed at relieving immediate suffering, regardless of its long term effects.

I think the political scales are tipped in favor of the latter, and Dr. Ben is providing the drugs.

[throwback]

As long as you don’t eat or drive, there is no inflation. I have the no driving down. Still working on the no eating part.

[EGPWS]

It’s the perfect medicine ... if the intent is to shuffle off the bad debt owned by the speculators onto the U.S. taxpayer.

Don't you understand, speculators are too big to fail!

If speculators lose then we ALL must lose. /s

[Sporke]

I admit I’m a bit of a dufus when it comes to national monetary policy.

The common sense part of me thinks that if the govt prints massive amounts of money, it instantly makes the prices of everything go up. It’s like an instant tax on everyone, even the 99%ers. Am I wrong?

If I am not wrong, WHY on Earth aren’t Conservative politicians GOING OFF on this? I would be in front of every camera I could find and explain to people how obama is taxing everyone, just to keep the banks happy. He would have no rational way to justify it.

Of course, I could be wrong, I just don’t know. :-/

[rawcatslyentist]

5.5 Trillion stolen so far, why stop now?

[9YearLurker]

Many FReepers would probably prefer not to recall that Bernanke was originally a Bush appointee.

[TLI]

The Federal Reserve’s Open Market Committee announced today that it would pursue $40 billion in additional monthly stimulus in the form of quantitative easing. Meanwhile, it will maintain its previous program of exchanging about $45 billion monthly in short-for-long-term securities. Quantitative easing, or QE, is purchasing long-dated government bonds and similar debt instruments.

QE∞

.

[Wyatt's Torch]

The act of “printing money” is not, in and of itself, inflationary. It is inflationary if it creates and excess supply of money relative to demand (i.e. too many dollars chasing too few goods). If, on the other hand, the “printing” keep up with demand it will be in/deflation neutral. You can actually “print money” and have it be DEflationary if it is not enough to keep up with monetary demand (i.e. too few dollars chasing too many goods).

[mjp]

The common sense part of me thinks that if the govt prints massive amounts of money, it instantly makes the prices of everything go up. It’s like an instant tax on everyone, even the 99%ers. Am I wrong?

You are right. mv=d and p=d/s. Therefore p=(mv/s).Or, in other words, money supply times velocity equals demand, and price equals demand divided by supply, therefore, price equals money supply times velocity divided by supply.So, if the money supply goes up it tends to cause prices to go up.

But, decreases in velocity which occurs in a recession, and increases in production and supply which occurs in the recovery from a recession are factors that can tend to decrease prices.These factors can cancel out the increase in prices caused by the increase in money supply.

[Gen-X-Dad]

QE∞ ---- We have reached the end game of every ponzi scheme. Crony capitalism is in complete control as the political sock puppets bow down before their banking masters. The absolute need for exponential debt growth to continue "business as usual" will crush the delusions of those who mortgage the future to live with no consequences in the present.

[KeyLargo]

New York Post
Bernanke’s Bad News

By CHARLES GASPARINO

Last Updated: 11:06 PM, September 13, 2012

Bernanke is well aware of the consequences of printing money: commodity price inflation (higher oil and food prices) and a further debasing of our currency.

And he knows that at some point he’ll have to do just the opposite, and start contracting the money supply and raising short-term rates before full-fledged inflation kicks in. When he does, the “wealth effect” of a rising stock market will evaporate, and so will the rest of the economy.

Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/bernanke_bad_news_fUiLLK5oa6jH1osPvrkWjL#ixzz26klC34ge

[KeyLargo]

How Team Obama-Bernanke Oppresses the Poor

Posted on September 14, 2012 by James A. Bacon|

If you’re truly a defender of the “1%” and indifferent to the plight of the poor in American society, don’t waste your vote on Mitt Romney. Barack Obama is your man. While the president proposes addressing society’s unequal distribution of income by raising tax rates on the wealthy, his administration stealthily enriches the rich and oppresses the poor. Under the Obama administration, the plight of the poor has gone from bad to worse.

In 2010 U.S. household income fell to its lowest level in sixteen years and poverty rose to a 17-year high, reports Bloomberg today. Median household income decline 2.3% and the percentage of people in poverty climbed to 15.1%. Median income is the lowest since 1996!

So, what is the policy response of the United States? More quantitative easing! Yesterday Federal Reserve Board Chairman Ben Bernanke announced that the Fed would purchase $40 billion in mortgage-backed securities every month until the economy improves. The Dow Jones Industrial Average promptly jumped 206 points, padding the pockets of the “1%” who own the lion’s share of the nation’s stock market equities.

While the Romney campaign predictably dissed Bernanke’s latest move as a politically motivated maneuver to prop up the economy before the election, the Obama administration has blessed Fed policy through its silence. Obama has blamed former President George W. Bush, lashed out against Congressional Republicans and denigrated “millionaires and billionaires” for the nation’s woes. But in 2010 he defended quantitative easing as good for the economy. And he has refused since then to join the growing chorus of the Fed’s critics...

http://www.baconsrebellion.com/2012/09/how-the-obama-bernanke-economy-oppresses-the-poor.html

[KeyLargo]

Ben Bernanke And The Fed Gave Mitt Romney A Huge Gift
James Pethokoukis, American Enterprise Institute | Sep. 14, 2012, 12:40 PM | 7,734 | 24

The common wisdom among the punditocracy is that the Federal Reserve’s announcement of its new, open-ended bond-buying program will provide a big boost to President Obama’s reelection by juicing the stock market and economy.

Actually, however, the Fed’s monetary move could give a huge messaging boost to Mitt Romney if his campaign plays it right.

Imagine this speech by the Republican nominee:

President Obama and his fellow Democrats spent their convention down in Charlotte trying to persuade voters that the U.S. economy is on the right track, that the president’s policies are working, that no president could have done a better job with the mess he inherited, that all that could be done has been done by this administration, that we must stay the course.

But yesterday, Federal Reserve Chairman Ben Bernanke finally admitted what most folks outside Washington already knew: The economy, three years into a supposed recovery, remains in terrible shape and is unlikely to get much better anytime soon.

Read more: http://www.aei-ideas.org/2012/09/bernanke-and-the-fed-just-gave-romney-a-huge-gift/#ixzz26knLMxhU

[KeyLargo]

[EGPWS]

The economy, three years into a supposed recovery, remains in terrible shape and is unlikely to get much better anytime soon.

A fact that proves one doesn't have to register on the I.Q. scale to vote for 0bama.

0bama himself showed some common sense when he stated: "If the economy doesn't turn around in 3 years then there's going to be a one term proposition".

[EGPWS]

5.5 Trillion stolen so far, why stop now?

We have so many trillions just sitting there waiting to be printed, it's such a waste to a progressive society.

[KeyLargo]

Obama is screwing seniors big-time with Bernanke ensuring that their life savings will be worthless due to the inability of having their personal savings grow at today’s ZERO interest rates under the Obama regime.

The Wall Street Journal

OPINION
September 16, 2012, 6:57 p.m. ET

Bernanke and the Fed Repeal Einstein

Near-zero interest rates, which are expected to last through mid-2015, make a mockery of thrift.

By ROBERT L. POLLOCK

Albert Einstein reportedly called compound interest “the most powerful force in the universe.” He didn’t live long enough to experience Ben Bernanke.

Last week the Federal Reserve chairman told the world that U.S. savers should expect the new normal of near-zero interest rates to last through mid-2015. So compound interest is a concept with which today’s early to mid 20-somethings will remain essentially unfamiliar.

For those of us who are slightly older, it seems as if Mr. Bernanke is on a mission to convince us that everything our grandparents told us about household economics was wrong.

My grandmother and grandfather were children of the Depression who built a successful dry-cleaning business with inspiration from—no kidding—a Wall Street Journal article. Then they built an insurance brokerage, and after much saving and hard work retired as the proverbial millionaires next door. They spent money on a house and a boat. But clothes always came from the secondhand shop, and Grandma remained an avid coupon clipper until she and Papa went into an assisted-living facility a few years back..

http://online.wsj.com/article/SB10000872396390443524904577651161572229598.html?mod=googlenews_wsj