U.S. Federal Reserve chairman Ben Bernanke – who will go down in history as the greatest big government interventionist in economic history – announced this week that his secretive central bank will continue creating $85 billion a month in new assets (a.k.a. printing money) as part of its open-ended “stimulus” efforts.
Of course Bernanke’s big announcement coincided with a downgrade of the 2013 economic outlook – additional evidence that nearly five years of so-called “quantitative easing” has failed to “stimulate” anything.
The first round of quantitative easing, known as “QE1,” took place from November 25, 2008 through March 31, 2010. Over that period, the Federal Reserve added $1.7 trillion to its balance sheet ($300 billion in Treasuries, $1.2 trillion in mortgage backed securities and $175 billion in agency bonds). The second round, dubbed “QE2,” took place from November 3, 2010 through July 1, 2011. Over that period, the Fed added $600 billion in Treasuries to its balance sheet.
Another so-called stimulus plan offsetting longer term securities with the sale of short-term debt (a.k.a. “Operation Twist”) began in September 2011 – and was extended in June of last year.
And of course last September, the Fed began its latest and greatest round of money printing.
What has all this stimulation spawned?
According to Duquesne’s Stanley Druckenmiller – who supported the initial quantitive easing – what we are witnessing is the “biggest redistribution of wealth from the middle class and the poor to the rich ever.”
Druckenmiller adds that the “net wealth effect” of all the money printing will wind up being “negative, not positive.”
Ouch …
Oh … and as for the economic “stimulus?” A record 90.5 million people aren’t working, wages are flat and spending is down. Anybody want to guess how this ends?
29 comments
With South Carolinians buying more mobile homes?
And maps.
Some people out there just don’t have ’em.
QE….. To Infinity and Beyond!!!
http://www.youtube.com/watch?v=ejwrxGs_Y_I
yep yep. First thing I said prior to QE1. It’s like a bag o’ chips. ‘Betcha can’t spend just one’ :) Fracking ‘Tards.
Will, Either hire an economic reporter or stick to politics. you really don’t know much about this and you are just quoting one guy who agrees with you. Can you explain how QE works and how it has helped or hurt the economy? Can you explain where the economy would be with out the Fed QE? Stick to what you know. When you don’t that is when people get in trouble. Just saying.
What are your thoughts on QE then? Has it been a good idea thus far? Should we continue? At what point should we stop? What will be the consequences? Will the good outweigh the bad?
QE has stopped us from entering deflation (IE Japan for 20 years). Have you ever seen deflation? I have not but we saw that in the 30’s and it kills the economy. Think about this, if you could buy something for cheaper next month then right now, would you buy now or wait. As for inflation. The easiest way I can put it is inflation equals the money supply(the Fed) times the multiplier of money (Banks lending). Well, the Fed is trying to make up for the banks not lending. Banks don’t want to lend at low rates and the FDIC is not letting them lend. I could go on much longer if you would like
“QE has stopped us from entering deflation (IE Japan for 20 years).”
I really couldn’t read the rest….you didn’t even properly identify that Japan has been in STAGFLATION for 20 years.
Hell, that’s not even really debated by any mainstream economists. When you start off with a false premise the rest doesn’t matter.
” I have not but we saw that in the 30’s and it kills the economy.Think about this, if you could buy something for cheaper next month then right now, would you buy now or wait.”
Are you a first year economist or something?
If deflation is so evil, maybe you can explain to everyone how not only they should they want the prices of TV & computers to go up every month…but while you are at it explain why that industry hasn’t yet gone out of business based on your genius observations about everyone waiting on purchases based purely on “lower expected prices”….lmao!
“Can you explain where the economy would be with out the Fed QE?”
Ha ha. Bernanke, Geithner, Krugman, Paulson, Yellen, etc. don’t know the answer to that question, and neither do you.
My fav Bernanke prognostication is that there was housing bubble right before it burst:
https://www.youtube.com/watch?v=INmqvibv4UU
I just noticed he predicted an auto industry recovery in that vid too.
lol….
I like you name. Bernanke knew where we would be. Why did he do it. Every economist I have seen has said we would be in deflation. See below what deflation does. Stop reading drudge and maybe you would know something about the real world. and yes, you are another douchebag.
There are three schools of thought on how this will end. Massive inflation. Massive Deflation or “we can print enough money to prime the economy and everyone will be rich, have healthcare and their own solar/wind powered unicorn farms which will create lavender smelling unicorn farts on which their hybrid cars will run.”
TBG is a proud member of theTeam WiskeyZulu* school of economic thought.
*Wiemar/Zimbabwe
What, you don’t want your own unicorn farm? Suit yourself. :P
Even if OP thinks that the good outweighs the bad when it comes to QE, there has to be a stopping point somewhere. $85 billion per month is just over a trillion dollars per year. That comes close to last year’s deficit and exceeds what this year’s deficit is expected to be. I would hope that would concern almost anyone.
What happens if the Fed doesn’t see the economic health it wants for another 5 years? Will we really do $5 trillion’s worth of QE?
What happens if another financial crisis dips us back into a recession or depression? We’ve taken very few steps to ensure a crisis like the last one doesn’t occur again, plus many are worried that we could be seeing another bubble arise with student loan debts. Wouldn’t that just throw all of what QE is supposedly doing right into the trash can? What will the Fed do regarding QE then, start right back up again?
Will we really do $5 trillion’s worth of QE?
Oh Hellz Yes!
And sooner than the next five years.
It’s really quite simple. Whoever is in charge will continue adding zeros so that the (inevitable) crash doesn’t happen on their watch.
What, you don’t want your own unicorn farm?
Pro Tip:
NEVER play leapfrog with a unicorn.
The Fed is not trying to make everyone rich, but trying to stop the economy from going into deflation. They don’t have much of a choice bc the government is not helping. Please see below but I will answer any questions you have. I know a lot about the Fed. A hell of a lot more than the hack Will is.
“I know a lot about the Fed.”
You don’t even know that Japan is in stagflation, or obviously why that is relevant to us.
You sound like one of those smart guys that like to point out where others are wrong. Not saying that’s bad and when I’m wrong I like to know it so I can re-calibrate my brain. In this case you sound like you know more than Mr. Folks, lots more. So I, for one, would appreciate some enlightenment. Mr. Folks has gone out on his limb and several others on this blog have gone out on their limbs, some only a very little bit, so kindly let us know what is really happening in the world of economics. Seriously, there is only a small bit of sarcasm here, I see no up side to all this stimulus, and this is stimulus, it’s just being inserted into the economy at a different location than the other hundreds of billions (totaling a couple of trillion) in stimulus. Tell us how this can possibly help more than a privileged few.
EJB,
Good question. We are in uncharted territory with these measures. I know most think it will be inflationary, but the banks must be lending for that to occur and the Government is not letting them. As Sen Chuck said The Fed is the only game in town.
Did you know the only major economy that has expanded their M2 money supply for the last 3 years has been China. Not the US. The Fed has no choice but to do this.
I was Asking Will to expand his thoughts instead of copy and paste someone else’s thoughts. I don’t think he gets it.
“I was Asking Will to expand his thoughts instead of copy and paste someone else’s thoughts.”
then you posted this:
“Every economist I have seen has said we would be in deflation.”
One more thing:
“Did you know the only major economy that has expanded their M2 money supply for the last 3 years has been China. Not the US.”
You are TOTALLY INCORRECT. You have just stated a complete factual error, just for yourself:
http://research.stlouisfed.org/fred2/graph/?id=M2
You have no credibility.
‘Mo money…’mo money…’mo money…
too bad it ain’t yo money…
Bennie don’t even want to contemplate how this will all end but he’s an expert on the Great Depression so if anyone has a handle he must, right? All he knows is it ain’t hurtin’ now and he hopes to be long gone when the dope wears off or we finally O.D…
And your solution is….?
I’d say the first solution might be to stop spending more than the country receives in tax revenue.
I know it’s a radical solution, but it might be a good first step.
Zimbabwe economics doesn’t seem to be working well so far…but maybe we just need more time and more money printing to see if can end differently for us versus them.
What Mr.Ben said is that we are going to have to continue with this because the darn economy is nowhere as good as the administration has depicted it to be. You have to stay on the teat.
Let’s say that “money” represents “attaboys” for work done (which it isn’t, but for the sake of argument, let’s say it is.) When you digitize currency with no backing it depreciates even the “attaboys,” because you are BORROWING the money from your citizens who will have to make up the difference – that’s done by taxation. You can’t tax the American People enough to make it up. It’s as simple as that.
The resulting inflation has already started – 30% since 2012. It’s why you’re hearing so much noise about raising the minimum wage – the administration has ruined the buying power of its currency. I know they talk about no inflation, but it’s just another lie. Ask your spouse how much it costs to feed you, how much it costs to drive to the store, or how much that last kindle novel cost you.
The solution is simple, but a very bitter pill – the market must fall, Congress must cut back drastically on any increase in spending, and whatever excess there is created must be used to buy back the debt.
In a just world, the President and Sen. Harry Reid would be tarred, feathered, and ridden out of town on a rail. But the world is not just, none of this will happen, and we will wind up like Post WW I Germany. And don’t forget – Lindsey and Jim helped.