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
Old Timer
September 14th, 2012
12:14 am
Lyndon Johnson had the “Great Society” now we are entering Obama’s “Great Terminal Society”. It is hard for an Old Timer to watch the citizenery not be able to see the forest for the trees. If it continues it will not be pretty. There are no Free Lunches regardless what Washington says.
IF YOU THINK OBAMA WANTS AMERICA TO PROSPER, THINK AGAIN… « QueenBeeWorld…
September 14th, 2012
12:38 am
[...] Fed, who also plays a role in the impending collapse of our economy, is getting in on it with the printing of money to help him stimulate the economy so it will increase his chances of being re-elected, which will prove to be severely detrimental. [...]
Chris
September 14th, 2012
12:44 am
This is intended to keep the stock rally going, so the people without jobs at least ‘feel better off’ since their retirement accounts are appreciating, at least in the short term (i.e. until the election). Other than that it was not politically motivated, LOL!
Lil' Barry Bailout - Vote American
September 14th, 2012
5:29 am
Got a nice bump yesterday in the share price of the mutual fund I have which buys “hard currency” of countries that aren’t selling out their citizens by deflating the currency. The fund is designed to do well when the dollar weakens.
Of course, I’d prefer that Obozo stop deliberately weakening our economy. I’d do even better that way!
marko
September 14th, 2012
6:00 am
Japan is smaller than California, It’s mountainous, largely devoid of natural resources, and totally dependent on international trade. It’s one of the least ethnically diverse places on earth. It’s government is a constitutional monarchy. As anyone can clearly see , the similarities between Japan and America are mind boggling. Nice apples to apples comparison there Kyle.
Antarctica would be a much better comparison. It’s bigger than America. Culturally diverse. Unemployment is nonexistent. Crime rates are extremely low. Average incomes are among the highest in the known universe. Antarctica, now that’s the ticket.
Jack
September 14th, 2012
6:42 am
Kicking the can down the road has new meaning today. Fed is going to buy paper that’s worthless and sell it when when necessary to reclaim the funds? Gimme a break.
Lil' Barry Bailout - Vote American
September 14th, 2012
6:56 am
Perhaps marko will identify a country sufficiently similar to ours, embarking on yet another stimulus like ours, for a more valid comparison. But I doubt it. marko, why will this round of currency debasement be any more effective than the previous ones? Make THAT comparison for us.
And more than three years after the recession ended, why is it even necessary?
Because your liberal fascist messiah is a failure.
For progress, vote American.
MadMax
September 14th, 2012
7:02 am
So we’re going to print $480,000,000,000 to buy bonds we can’t sell at current rates in order to keep our interest rates low so we can “afford” to keep borrowing? I didn’t know Milken and Madoff were running the Fed.
Lil' Barry Bailout - Vote American
September 14th, 2012
7:07 am
Is it just a coincidence that the amount Papa Ben is going to airdrop into the bond market the same as what Obozo wanted to waste in his latest “jobs” bill (you remember, the one the Senate voted down)?
Del
September 14th, 2012
7:41 am
QE certainly helps Wall Street but puts a hit on Main Street. Obama says he’s for the middle class and thinks the wealthy make too much money. Bernanke, isn’t helping the poor and middle class but Wall Street’s happy. Of course Obama likes to see gasoline prices go up, so the masses will by Chevy Volts.
Del
September 14th, 2012
7:43 am
oops, buy Chevy Volts.
Tiberius - pulling the tail of the left AND right when needed
September 14th, 2012
7:52 am
In the private sector, Bernanke would be taking a perp walk with this move, but since he’s associated with bigger government, he’s hailed by the left as a hero.
Nice double standards, libs!
jay2
September 14th, 2012
7:57 am
For an unelectable kook Ron Paul has sure got a lot right. . Republicans,and Democrates have there parties, you and i am not invited..For those who dont know- one (Trillion dollars) is 1,000 billion.
Well the question is not if we will collapse. The question is when will we see the effects of the collapse that has happened?
Del
September 14th, 2012
8:05 am
Ti,
There is concerning inflation that isn’t being reported. The price of gasoline at the pump due to rising oil prices and higher food prices. Quantitative Easing exacerbates these issues, which hurts the poor and middle class. The wealthy don’t feel this pain but do see their stock portfolios get richer. I don’t understand the left feeling this move by the F/R is good as Bernanke himself says it won’t help unemployment and of course that’s been proven by the previous rounds of QE.
Lynnie Gal
September 14th, 2012
9:10 am
The Feds are trying to stimulate job growth because the Republican-controlled House will not do it’s job to pass the president’s jobs bill or aid the economy in any way whatsoever. Republicans oppose anything that will aid and heal the economy because they think (thought) they can use the economy as a club to beat Obama out of office. But their plan is backfiring because what people are focused on is how intransigent Republicans have been about getting this economy on track. Demographics are against Republicans after this election, so this is their last stand as an all-white, mostly male political party.
Just Saying..
September 14th, 2012
9:16 am
Kyle’s World:
..”exceptionally dubious” equals “…your America-hating diatribes…”
And we wonder why our elected representatives are dysfunctional…
mobydick
September 14th, 2012
9:16 am
Wow, just wow. I can’t believe the trolls like JDW who are under the false assumption that all is well in fairytale land. It blows my mind that people actually think the FED’s action from yesterday is a GOOD thing? Is this bizzaro world? Oh wait…….
Rafe Hollister, suffering through Oblamer's ineptocracy
September 14th, 2012
9:17 am
If the Libs had one iota of consistency, they would oppose this “easing” and brand it “QE for the Wealthy”, but they put Obama’s reelecton over consistency. So, Bernanke believes in trickle down, because that is the only way the QE helps the folks, who are not wealthy and do not own stocks.
Rafe Hollister, suffering through Oblamer's ineptocracy
September 14th, 2012
9:19 am
Lynnie Gal
September 14th, 2012
9:10 am
So, now trickle down creates jobs?
Finn McCool (The System isn't Broken; It's Fixed)
September 14th, 2012
9:24 am
You cons throwing Joe Scarborough under the bus this morning?
The big tent party? Ha
Steve Dunbar
September 14th, 2012
9:30 am
From Republicans:
Tax cuts for the rich today,
Tax cuts for the rich tomorrow,
Tax cuts for the rich forever.
Del
September 14th, 2012
9:30 am
Bernanke must think he’s helping Obama by duping the public into believing that QE3 will turn the economy and unemployment around by when? Yes he says by 014, so it’s safe to give the Obummer another term in office. Dumocrats are stupid enough to believe this repeated scam but the poor and middle class shouldn’t believe it because they’re the ones getting hurt. Those at or below the poverty level have risen to 15% of the population under Obama’s watch. If he gets a second term look for poverty to significantly go higher.
retiredds
September 14th, 2012
9:38 am
Date
01/16/2009 Total Public Debt Outstanding $10,628,881,485,510.23
01/19/2001 Total Public Debt Outstanding $ 5,727,776,738,304.64
Source: http://www.treasurydirect.gov/NP/NPGateway
P.S. I was wrong on two counts: I used the word deficit when I meant debt and I used the wrong year, 2008 instead of 2009. Numbers don’t change much.
Del
September 14th, 2012
9:42 am
Wow it took Bush two terms in office to increase debt by 5 trillion and it’s only taken Obama one term to increase it by 6 trillion.
the red herring
September 14th, 2012
9:45 am
kyle–you are correct. this is a failed course and will lead to much pain eventually. it is however bernanke’s only course as he must try and get his man re-elected in order to keep his job. it’s called self preservation. it will eventually lead to inflation like in the carter years (if the powers that be counted food and gas the inflation is already here). keeping all the interest rates artificially low for awhile simply strips many retired people of some of their income. It’s simply a bad economic move that even though it causes stock prices to rise for the time being will backfire or lead to a stock that sells for $100 actually being worth $40 or a dollar being worth 40 cents. When we have to pay $5/gal for gas and $14/lb for steak it will be hard times in america regardless of whether or not the Dow sits at 15,000.
Precious metals prices higher this week - Valley Goldmine San Francisco
September 14th, 2012
9:48 am
[...] as a response to the monetary authorities continued loose, dovish, and accommodating policies. Read here for a timely article about the impact of quantitative easing posted by Kyle Wingfield on September [...]
Tiberius - pulling the tail of the left AND right when needed
September 14th, 2012
9:54 am
“The Feds are trying to stimulate job growth”
Because it worked so well in the last 4 years?
JP
September 14th, 2012
10:06 am
Japan is moving to reduce the value of the yen in relation to ours, with ECB buying bonds, the value of the Euro will fall as well. Folks, the United States is in a unique position to have our Central bank pump liquidity into the market. Our inflation is low, bid to cover of our debt is almost 3 (For every dollar of debt we issue there are 3 dollars trying to bid on it) and the world wants to sell the US products… so they are going to reduce the value of their currency so their exporters can sell products at a discount. All of this pressure on the dollar downwards is actually causing more pressure on the Chinese to increase the value of the RNB… This is not as simple as some would hope it would be including both political parties. This is a complicated situation and no one liner can sum up any of what is going on. Yes people are getting low interest on savings, but they are paying low interest on debt also… but that is the point! We want people to go out and spend money and invest it.. not to let it sit out on the sidelines of the economy.
Tiberius - pulling the tail of the left AND right when needed
September 14th, 2012
10:16 am
“We want people to go out and spend money and invest it.. not to let it sit out on the sidelines of the economy.”
How many times does this have to be repeated before it sinks in, JP?
IT DIDN’T WORKED BEFORE!
What has changed to make you think it will work now?
MarkV
September 14th, 2012
10:35 am
Some of the comments on inflation are appallingly ignorant. Seasonal and disaster related food prices and gas prices have little to do with the monetary policy of the Feds. “Printing money” theoretically results in inflation, but those predictions have been around for years now and inflation remains low and economists expect it to remain low for several more years. “The wealthy don’t feel this pain but do see their stock portfolios get richer” is nonsense. Inflation devalues the currency; therefore, the value of a portfolio diminishes just like of everything else that people own, whether the person is rich or poor (except for those, who stash some of their money in foreign accounts, like Romney). Inflation helps exports, and makes imports less competitive compared to domestic products.
Tiberius - pulling the tail of the left AND right when needed
September 14th, 2012
10:39 am
“Some of the comments on inflation are appallingly ignorant.”
Strange. I was just thinking the same thing about comments supporting this failed policy.
Bruno
September 14th, 2012
11:22 am
Just saw that Hillary Clinton is joining the chorus of voices condemning the anti-Islamic film. What a bunch of crap. Since when have any Middle Eastern governments apologized for anti-Christian or anti-American propaganda??
Just gives me one more reason to vote for Romney.
Bruno
September 14th, 2012
11:25 am
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.
What gets my goat is how the Dems keep making political hay about the disparity in wealth in our country from the top to the bottom. Exactly what have they done about it the past 4 years other than blame the Republicans??
Libs = Losers.
Halftrack
September 14th, 2012
11:27 am
Printing more money only devalues our dollar’s value down. We are now 16 Trillion in debt. We are at the edge of the cliff or our vehicle that we are in is balanced midway on the edge of the cliff. We need a real answer, not a political calculation for more votes. The long term view is that we are headed for a depression.
Bruno
September 14th, 2012
11:35 am
Printing more money only devalues our dollar’s value down. We are now 16 Trillion in debt.
Halftrack–I’ve been saying for a while now that the only plausible way to pay down the debt is to devalue our currency. Looks like Bernanke and Co. have us well on the way.
Bruno
September 14th, 2012
11:39 am
In short, the Fed said it will increase its purchases of mortgage-backed securities by $40 billion a month until employment improves.
The Dems, including our own JDW, have been touting the 4.5 million jobs “created” in the past 29 months. For some reason they keep forgetting to mention that they are primarily low-paying jobs. It’s got to be the Republicans fault somehow……
I think history will remember Obama as the “Excuse President”.
Bruno
September 14th, 2012
11:49 am
Yes people are getting low interest on savings, but they are paying low interest on debt also… but that is the point! We want people to go out and spend money and invest it.. not to let it sit out on the sidelines of the economy.
JP @ 10:06–Thoughtful post, but like Tiberius, I’m not so sure I agree with your conclusion. During the early 2000s, personal debt skyrocketed. And though the economy did fairly well, there comes a time when all that debt has to be paid back. Then, when a substantial number of people default on their loans, as happened in the later 2000s, it has a nasty backlash on the economy, from which we’re still recovering.
From what I’ve read, people (including myself) are paying down their debt at a substantial rate. While it has the short-term effect of reduced consumer spending, it has the long-term effect of putting us all on more solid financial footing, thus allowing people to invest in the future once again.
Henne
September 14th, 2012
12:02 pm
Funny headline Gov. Wallace.
iggy
September 14th, 2012
12:04 pm
…and Jimmy Carter keeps flappin his gums only confirming his idiocy.
Del
September 14th, 2012
12:05 pm
MarkV,
Must read a lot from Paul Krugman. First he states that inflation remains low and will for several years but he then says inflation devalues currency therefore it’s devaluing stock portfolios. What does MarkV think QE does to our currency? BTW…MarkV must ride his bike for transportation and grow his own food, so rising gasoline prices and rising prices for food in the grocery stores don’t effect him.
Bruno
September 14th, 2012
12:08 pm
Just saw a hilarious quote over on yahoo regarding the ME violence:
“Let me see if I understand this, they kill and destroy to protest a film that accuses them of barbaric behavior.”
md
September 14th, 2012
12:13 pm
Paying off debt is a no brainer right now……interest earned is next to nothing, but paying off debt with higher rates is actually making people money…….
Rafe Hollister, suffering through Oblamer's ineptocracy
September 14th, 2012
12:14 pm
therefore, the value of a portfolio diminishes just like of everything else that people own, whether the person is rich or poor
Mark, I don’t think that makes sense. Unless they issue more stock, devaluing what is out there, the value stays the same, only the stock price goes up, because the currency is devalued. When you sell your portfolio, you reap devalued dollars, and you have to pay taxes on the “false” profit, which may cause some small loss, depending on how deeply devalued the currency is.
Darwin
September 14th, 2012
1:08 pm
I just checked. My YTD return on my 401K is 7.98%. Oh yes, let’s fire the guy in the White House.
MarkV
September 14th, 2012
2:05 pm
Del @12:05 pm
Inflation remains low under current conditions of slow growth of the economy. Eventually inflation will increase, but a moderate economy is a normal condition, and has several positive effects, some of which I have named. It has been with us almost always.
Naturally, del cannot resist an inanity about gas prices and food prices – ignoring what I have written.
MarkV
September 14th, 2012
2:14 pm
Rafe Hollister @ 12:14 pm
There is no automatic relationship between inflation and the stock prices.
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
September 14th, 2012
2:59 pm
True, he may not know it. He may be gliding through the final four months of his presidency absolutely convinced he’s king of the world, but he’s a failure. The country doesn’t re-elect failure, no matter how urgently fellow failed and aging “journalists” or their young acolytes –”What’s our question Jan?”– desperately want him to be thought a success.
mullah obozo and his raving pack of msm lunatics, howl and bay.
But We The People are not blind.
Lil' Barry Bailout - Vote American
September 14th, 2012
4:27 pm
US Credit Rating Cut by Egan-Jones … Again
Ratings firm Egan-Jones cut its credit rating on the U.S. government to “AA-” from “AA,” citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality.
In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.’s real gross domestic product, but reduces the value of the dollar.
In turn, this increases the cost of commodities, the firm said.
http://www.cnbc.com/id/49037337
wooooo
September 16th, 2012
12:31 am
From all the ads I thought it was Romney who wanted to screw the middle class? At least Romney said he will fire Bernanke.
The Real World News and Commentary – September 16, 2012 | FPP.cc
September 16th, 2012
12:40 am
[...] http://blogs.ajc.com/kyle-wingfield/2012/09/13/fed-quantitative-easing-now-quantitative-easing-tomor... [...]