Fed: Quantitative easing now, quantitative easing tomorrow, quantitative easing forever
The Federal Reserve’s Open Market Committee today said it will keep trying to print money until the economy recovers. In short, the Fed said it will increase its purchases of mortgage-backed securities by $40 billion a month until employment improves. So, indefinitely. Combined with other maneuvers, the Fed said its asset holdings will increase by about $85 billion a month through the end of this year. And the money-printing may not end there; from the Fed’s statement:
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. (emphasis added)
This is not what people mean when they talk about “wealth creation.” In fact, it’s very nearly the opposite of that: The inevitable devaluing of the dollar — the prices of gold, silver and several other commodities spiked in the minutes following the Fed’s 12:30 announcement — means our savings will lose value. This is the destruction of future wealth in the hopes of creating some current economic growth. In that respect, it is no different from increasing the budget deficit even further to fund even more Keynesian spending.
Will it work? Ask Japan; they’ve been trying such “quantitative easing” since 2001, without much positive effect. This is our third round of it in the past four years.
The Fed already had said it would keep short-term interest rates at or near zero until 2014. Today, it said that policy was likely to remain in place until mid-2015, which is three years from now and six years after the nominal end of the Great Recession. The new bond-buying comes on top of that.
Folks, this is what pushing the panic button looks like. It’s unclear what, if anything, comes between the panic button and the white flag.
– By Kyle Wingfield
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402 comments Add your comment
I demand to see Cheesy Grits Birth Certificate- Long Form Please
September 13th, 2012
3:45 pm
Still not too late to buy gold and silver. Get out of Federal Reserve Notes as quickly as you can. The end is just around the corner. Buy food, ammo, and plenty to barter if you can afford it and plant a big garden.
Just watch out for the black helicopters !!!
Kyle Wingfield
September 13th, 2012
3:46 pm
murph: I’ve pushed your original comment through.
Kyle Wingfield
September 13th, 2012
3:47 pm
Rafe @ 3:43: Obama does not control the Fed. The link between Obama’s policies and the Fed’s actions is that the Fed’s actions wouldn’t be necessary if Obama’s policies had been more effective.
Michael H. Smith
September 13th, 2012
3:48 pm
Hasn’t the “obumer” economic recovery been fantastic. Why it has been so impressive the FEDs’ just can’t seem to pump it up enough to resuscitate the “obumer” economic recovery.
Class dismissed liberals.
Michael H. Smith
September 13th, 2012
3:50 pm
Kyle Wingfield
September 13th, 2012
3:47 pm
THAAAAAAAAAAAAAAAAAAAAANK YOU!!!
Spot on Kyle.
They BOTH suck
September 13th, 2012
3:52 pm
Kyle
Thanks for informing those who either are ill informed or are so quick with a talking point that they decide facts are useless.
I demand to see Cheesy Grits Birth Certificate- Long Form Please
September 13th, 2012
3:52 pm
The problem with that Kyle is it really depends on which etch a sketch Romney picked up that morning.
Remember he was for intervention in Libya.
Then when we did go in he was against it.
During the Republican primaries, GOP rival Jon Huntsman accused Romney in October of being a “perfectly lubricated weathervane on the important issues of the day, whether it’s Libya, whether it’s the debt ceiling.”
Very well said.
look at youtube - song of mitt's self
September 13th, 2012
3:52 pm
Anybody who looks at actual numbers, rather than just watch Fox or listen to Rush, knows that economy is much better today than it was on Jan 19, 2009, Bush 2’s last day in office. If you don’t believe that, why not sell your investment portfolio for the Jan. 19, 2009 price and donate the growth to charity. Don’t have an investment portfolio to sell? Well, then what in the world makes you qualified to comment on the economy? Trickle down screws those who get trickled upon.
murph
September 13th, 2012
3:53 pm
Thanks, Kyle. It wasn’t that profound of a statement but couldn’t figure what line I’d crossed.
Kyle Wingfield
September 13th, 2012
3:53 pm
One more thing about Russia: If you don’t think they consider us their No. 1 geopolitical foe, you’re kidding yourself.
Jefferson
September 13th, 2012
3:53 pm
If you can’t beat them, cry about it.
Linda
September 13th, 2012
3:54 pm
I demand@3:23, I stand by what I said. The unemployment rate was 7.8% in 1/09. Yes, it went to over 10%. It’s 8.1% today. Simple math.
Obama & his policies have not created one single, solitary NET job.
If you look at the entire unemployment picture, you will see that the labor participation rate is the lowest it’s been in 32 years. If it was the same today as what it was when the recovery began in 6/09, the unemployment rate would be 11.2%. If you add the involuntary unemployed, it would be 19%.
The unemployment rate under U6 is 14.7%.
There’s been 8 million people that have dropped out of the labor force since O took office. There’s 12.5 million people who are unemployed.
We are at depression levels numbers.
Kyle Wingfield
September 13th, 2012
3:56 pm
murph: It happens sometimes.
No Artificial Flavors
September 13th, 2012
3:57 pm
Im glad I held on to my $100 trillion note from Zimbabwe’s hyper inflation days. Maybe the Treasury can use it as a template.
Rafe Hollister, suffering through Oblamer's ineptocracy
September 13th, 2012
3:57 pm
I heard Ryan say yesterday that they are going to cut tax exemptions, subsidies, and tax breaks, as they lower the tax rates for everyone. He said, and I agree, that you can’t be too specific, while trying to get elected. If they say they are going to cut the subsidy for corn, they lose Iowa and Nebraska, the subsidy for Sugar, they lose Louisiana, and on and on. He said the Dems while offering no economic plan would just sit back and pick apart their plan and turn those voters affected, away from them. That is why they are not being specific on things to cut.
Shawny
September 13th, 2012
3:59 pm
This is ridiculous. If you save, you are punished. If you spend, you are rewarded.
The left continues to ’spread the wealth’ by taking away from those that have it (devaluing dollar).
From those according to their means to those according to their needs (or something like that) —- Karl Marx
Buzzy
September 13th, 2012
3:59 pm
Wow. Kyle needs to read his CNBC. They have basically been begging for the stimulus because it will push up financial assets like stocks.
Of course, it will do nothing for the middle class.
We need a fiscal stimulus which only the Congress can do. This will put money directly in the hands of the workers, and the money will circulate giving what economists call a “multiplier effect”.
The elected officials are not doing their job. The Fed. has done all it can do. We don’t need tax cuts. The Bush tax cuts did nothing but put us in debt. We need a fiscal stimulus program.
look at youtube - song of mitt's self
September 13th, 2012
3:59 pm
Yes, Kyle, you are right, Obama doesn’t “control” the Fed. I’m sure that if the Fed did something that displeased you, you’d be quick to claim he did, but he doesn’t. Of course, Obama’s had to fight tooth and nail for a sane economic policy – against the likes of Mitch McConnell (R – Kentucky) who have publicly stated their number one goal was to limit Obama to one term – not help spur employment, fix our infrastructure or lift a finger to improve the economy – just get rid of Obama. What a prize American. When one party wants the country to fail so they can get the incumbent out of office, it’s really hard to make progress.
Shawny
September 13th, 2012
4:01 pm
Buzzy, money directly in the hands of the workers is called a tax cut.
look at youtube - song of mitt's self
September 13th, 2012
4:03 pm
Linda, if you look at a graph of private employment, you’ll see that after a few months of continued downward movement after Obama took office, employment rates have consistently improved. Now, with governments looking to cut costs, public sector jobs have continued to go down, but there has been real improvement in the private sector. Of course, you’ll need to look at some real numbers to see this, not just go with Fox’s talking points.
No Artificial Flavors
September 13th, 2012
4:03 pm
Quantitative easing reached the tipping point within the law of diminishing returns after its first implementation. QE2 was an insult. QE3 is dangerous.
Skip
September 13th, 2012
4:05 pm
Everyone knows the way out of this is to cut taxes on the 1%ers. This takes time but after 12 years or so we should see results. Hold on, only a couple more years and the trickle down will begin.
Rafe Hollister, suffering through Oblamer's ineptocracy
September 13th, 2012
4:06 pm
Kyle, I know that the Fed is suppose to be independent. Romney has announced that he will not reappoint Bernanke, so whom do you think Bernanke favors? I think there is some winking and nodding going on. I do not feel Barry is upset by this action at all.
They BOTH suck
September 13th, 2012
4:07 pm
Rafe
Is that speculation to feed your narrative or do you have anything to back that up?
Kyle Wingfield
September 13th, 2012
4:09 pm
look at youtube @ 3:59: “I’m sure that if the Fed did something that displeased you, you’d be quick to claim he did…”
Well, the Fed did something today that displeased me — as evidenced by this entire blog post — and I pointed out that he doesn’t control it. So I’d say you should reconsider what you’re “sure” about.
md
September 13th, 2012
4:11 pm
“in fact, given the potential for appreciation in real estate”
I do believe it was that same potential that caused the last problem and why many of us are upside down……
Kyle Wingfield
September 13th, 2012
4:12 pm
Rafe @ 4:06: Oh, Obama might well be glad the Fed did this — I haven’t seen a statement from the White House one way or another — but that’s a different matter. I tend to doubt, though, that Bernanke would go to this length to preserve his job.
Buzzy
September 13th, 2012
4:12 pm
That is not necessarily true Shawny.
If you get a relatively poor worker a job, he must spend the money. He must put it into circulation to survive.
A better off person with a tax cut can send his money overseas, as they often do. Or, they can save it. You many saving is great…and it usually is…but not now.
We have a money glut right now. Money is cheap and it’s pentiful. It’s just not circulating. If you want money to circulate, give the poor and middle class jobs, and you’ll get the multiplier effects.
The Bush tax cut did zero for America. All it did was help the super rich get richer. I sure didn’t help the economy. People need jobs to keep up their skills too.
MarkV
September 13th, 2012
4:14 pm
Secretary of State Colin Powell cautioned presumptive GOP presidential nominee Mitt Romney against calling Russia a “foe” of the United States.
Powell told CNN that while Washington and Moscow might disagree on various issues, they were far from being enemies.
“Foe means enemy,” Powell said. “Will we have differences of opinion with the Russians? Yes. Will they get mad at us from time to time, and we get mad at them? That’s part of the normal diplomatic relations.”
http://www.upi.com/Top_News/US/2012/05/23/Powell-cautions-Romney-on-Russia-as-foe/UPI-89021337815294/#ixzz26NmT0Epz
I will take Colin Powell’s opinion over Kyle’s anytime.
They BOTH suck
September 13th, 2012
4:19 pm
Kyle
Bernake and the FED could certainly be making a mistake as you have asserted. They are certainly not all knowing and the economy is fluid with many variables playing a part, some at a higher degree than others at any given time.
Heck Greenspan basically admitted that some assumptions the FED made during his reign played a role in this last and current down turn.
http://www.youtube.com/watch?v=PWen53eqmJo
Buzzy
September 13th, 2012
4:20 pm
I agree with you Mark V.
Valdimir Putin said yesterday and he will oppose the NATO missile shield for Eastern Europe now because of Romney’s remarks.
So chalk another foreign policy goof to Romney. I think there are same smart Republicans out there, but they have picked another dud for their presidential candidate.
No Artificial Flavors
September 13th, 2012
4:21 pm
At least Russia looks out for #1. We try too hard to appease the world while Russia laughs at us behind our backs.
Linda
September 13th, 2012
4:21 pm
I haven’t asked Mitt, but I’ll put up a wager that one of the 1st expenses he might cut is our foreign aid to Russia, our 6th largest recipient of foreign aid, ahead of China. Not only do we give Russia foreign aid but then we turn around & borrow money from them. Do you think Russia thinks we’re sane? Do you think Russia thinks we’re saner than we are “flexible?” Does Russia have our back at the UN any more than our having Israel’s back?
Speaking of foreign aid, the last time I checked the US gave foreign aid to every country in the world except for three. Look at all the friendships we have built!
Why are 4 of our top ten recipients of foreign aid 4 of the richest countries in the world? That includes India, Russia, China & Brazil. Why are 6 of our top ten recipients of foreign aid also our creditors? Is that money laundering?
Why are we funding both sides of the Wars (plural) on terrorism?
Why are we paying a country who harbored OBL & who is imprisoning & torturing the doctor who aided us in finding him?
Why are the Hatiian people still dying from literally drowning in mud?
Why is our 3rd top recipient of foreign aid allowing our embassy to be attacked?
What country do these firefighters, police officers & teachers live in who need jobs?
Buzzy
September 13th, 2012
4:26 pm
Linda, I think you need to read up on how foreign aid actually works. There are books on it in the library. Most of the money comes back to us in droves and is linked to some specific trade law or program.
There is some money that we send overseas that never comes back. This is for food and humanitarian assistance to really poor nations.
However, most of our foreign assistance is money well spent, it’s not just thrown away. Of course, we always need to review our programs to make sure they are not being abused. That’s just good government.
Auntie Christ
September 13th, 2012
4:27 pm
MrLiberty
September 13th, 2012
3:27 pm
Still not too late to buy gold and silver. Get out of Federal Reserve Notes as quickly as you can. The end is just around the corner. Buy food, ammo, and plenty to barter if you can afford it and plant a big garden.
**********************************
You forgot: build a big bomb shelter, and above all Repent! the end is nigh!
Don't Tread
September 13th, 2012
4:29 pm
Democrats hate freedom…especially economic freedom. If all else fails, bankrupt the entire system and then demand “the rich” pay for it since it was “their fault”.
Del
September 13th, 2012
4:32 pm
QE does help lift the stock market but it’s effect on job creation and GDP growth hasn’t had much impact. I thought I read an article several months ago where Bernanke himself said that he didn’t think QE would help much now.
http://www.forbes.com/
Buzzy
September 13th, 2012
4:32 pm
By the way, I agree with you Linda that our money is not being spent well in Haiti, and that includes the private money too.
Haiti just does not have a functioning system at all. They don’t have a functioning government really.
So much of the money is still waiting to go down there. It’s tragic, but it’s a broken society and very difficult to put a rational program in place in short order.
md
September 13th, 2012
4:32 pm
“Since then, there’s a lot of reason to believe the Fed has reached the limits of its power to spark the economy by printing money.”
And that is what happens when the fed goes through it’s arsenal of weapons with little to no effect……they are now trying to fight the fight with a peashooter………
Obama Supporter Interviews Herself
September 13th, 2012
4:34 pm
…were they all this stupid?
http://www.youtube.com/watch?v=cxE-lGK_OZU
Buzzy
September 13th, 2012
4:35 pm
Del, you are absolutely right.
All monetary stimulus does is help lift financial assets for a while. Interest rates are at about zero already. You can’t push on a string.
We need a big fiscal stimulus program because the poor and middle class must spend almost all they make, and this boosts the economy from the bottom up.
Tax cuts don’t work because rich people just don’t need to spend the money. They can send it overseas and they often do.
Rafe Hollister, suffering through Oblamer's ineptocracy
September 13th, 2012
4:35 pm
TBS, Silence is confirmation that Barry has no problem with Bernanke’s action. Anyone who thinks that Bernanke did not divulge his plans to the WH some time ago is not rational. He has floated his plans to the press for the last three or four weeks. Barry had plenty of time to voice his opposition, if he wished.
The Dems continuing to pretend that Russia is anything but a rival on the world stage, and pretending that they are not working behind the scenes to make our foreign policy fail, is irrational. Maybe they want to try the “reset” button again.
China and Russia have pretty much opposed our actions against Syria, N Korea, and Iran at every turn, for no reason other than, it benefits us and helps their standing with these small countries that share their hatred for America.
Rafe Hollister, suffering through Oblamer's ineptocracy
September 13th, 2012
4:37 pm
Buzzy
85% of the Bush tax cuts went to the middle class.
Buzzy
September 13th, 2012
4:38 pm
Is that so? I think you have been listening to too much Faux News.
They BOTH suck
September 13th, 2012
4:40 pm
Rafe
Thanks for more speculation and mentioning Russia and China which I do not recall mentioning…….
Keep swinging and throwing out talking points
Linda
September 13th, 2012
4:41 pm
look@3:39, Don’t forget that there was a Dem. House, filibuster-proof Dem. Senate & Dem. White House for about 2 yrs. The Dems. did not need the Reps. to pass anything.
If the Reps.’ #1 goal was to limit Obama to one term, is it fair to say that Obama’s #1 goal was to serve 2 terms?
I am totally convinced that Obama is intentionally destroying the country.
look@4:03, Do you dispute one statistic that I quoted? My numbers came from BOL.
There’s been job losses & gains, but the losses have been greater than the gains. Not one single NET job has been created under Obama. That’s a fact. It’s simple math. 8.1% is a bigger number than 7.8%. Got it?
Buzzy
September 13th, 2012
4:41 pm
What the Bush tax cuts did was put us much deeper in debt. It was the first time in history that we cut taxes during a war. Of course, we had two wars going. Totally irresponsible.
If the Bush tax cuts did what they claimed they were supposed to do the U.S. would have the best economy in the world right now.
They were a mistake. They did nothing to help our economy.
md
September 13th, 2012
4:41 pm
” If you don’t believe that, why not sell your investment portfolio for the Jan. 19, 2009 price and donate the growth to charity.”
Well, when corps cut millions of employees from their payrolls, it is usually safe to say their value will go up as their expenses go down………
They BOTH suck
September 13th, 2012
4:42 pm
Rafe
So what was Bernkae going to do if Obama told him no?
Let’s read some more of your grand conspiracies and speculation. You are good at this.
Let me know when you can substantiate anything. We all have opinions, but some substantiation and less conspiracy every now and then would be nice
Peace
md
September 13th, 2012
4:44 pm
“Valdimir Putin said yesterday and he will oppose the NATO missile shield for Eastern Europe now because of Romney’s remarks. ”
Putin’s opposed it since it’s inception……..he was never going to approve it unless he controlled it. So that’s a bogus excuse…..