QE3? Several Top Fed Officials Seem To Think That More Quantitative Easing Is Necessary

The Economic Collapse ^ | 03/05/2011 | Michael Snyder

[SeekAndFind]

The end of QE2 is still several months away and yet quite a few top Federal Reserve officials are already hinting that more quantitative easing may be necessary. Apparently the U.S. economy is not moving forward as rapidly as they would like. So it looks like "QE3" could be on the way. But did anyone out there actually believe that quantitative easing would come to a complete stop in June? Whether they call it "QE3" or something else entirely, the reality of the matter is that we have now come to a time when the Federal Reserve is going to be continually purchasing a significant percentage of all new U.S. government debt. This is essentially a gigantic Ponzi scheme, but sadly there is just not enough money in the rest of the world to be able to continue to feed the U.S. government's voracious appetite for debt. Right now Ben Bernanke and his cohorts are trying to break the news to us gently, but anyone with half a brain can see what is happening. The only way for the game to keep going is for the Federal Reserve to print lots more money, and that is going to be incredibly bad for the U.S. economy in the long run.

The other day James Bullard, President of the Federal Reserve Bank of St. Louis, made national headlines when he declared that Fed officials should "never say never" when it comes to QE3 and more quantitative easing. But the truth is that other Fed officials have been dropping public hints about the "need" for QE3 for several weeks now. Just consider the following quotes from top Federal Reserve officials....

Federal Reserve Chairman Ben Bernanke in response to a question about the potential for QE3 at the National Press Club....

"In the end, we'll just ask the same questions. Where's the economy going, and what do various inflation indicator look like? We'll ask those questions. If unemployment is still too low, then we may continue. If we're moving towards full employment, then we won't need to stimulate more."

William Dudley, President of the Federal Reserve Bank of New York during a recent speech at New York University....

"The economy can be allowed to grow rapidly for quite some time before there is a real risk that shrinking slack will result in a rise in underlying inflation."

James Bullard, President of the Federal Reserve Bank of St Louis during a recent speech at the Bowling Green Area Chamber of Commerce....

"The natural debate now is whether to complete the program, or to taper off to a somewhat lower level of asset purchases. Quantitative easing has been an effective tool, even while the policy rate is near zero. The economic outlook has improved since the program was announced."

Charles Evans, President of the Federal Reserve Bank of Chicago during a recent interview with The Financial Times....

"The message that comes out of what I think of as high-quality research on this subject is that policy ought to remain accommodative for really quite a while, even a while after conditions start to improve."

So how in the world did things get to the point where the Federal Reserve feels forced to recklessly print gigantic piles of money?

Well, it didn't happen overnight. Back during the 1980s and 1990s there were many people that desperately tried to warn about what would happen if U.S. government debt was not brought under control.

Unfortunately, our politicians did not heed those warnings.

Today, the U.S. national debt has reached a grand total of $14,137,541,098,872.71. It is 14 times larger than it was just 30 years ago. It is the largest single debt in the history of the world.

So why don't our politicians just balance the budget now so that we don't keep having to borrow so much money?

Well, there are some huge problems. First of all, when you combine entitlement programs such as Social Security and Medicare with interest on the national debt, it comes to approximately 64 percent of all federal government spending.

But that is not the bad news.

In the years ahead, entitlement spending and interest on the national debt are both projected to absolutely explode.

We are rapidly approaching a time when spending on entitlement programs and interest on the national debt will be significantly greater than all of the revenue that the federal government brings in each year. All federal revenues will be spoken for even before a single penny is spent on defense, education, running the government or anything else.

Either entitlement programs are going to have to be seriously reformed or the U.S. government is going to have to come up with a massive amount of extra money from somewhere or the U.S. government is going to have to borrow increasingly large piles of money from someone.

Unfortunately, there are no easy solutions and most of our politicians are scared to death to touch entitlement programs because it will mean that they will lose votes.

But our entitlement programs were never meant to be as massive as they are today. Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 American is on Medicaid.

Obviously something has to be done, because the debt that we are passing on to future generations is absolutely criminal.

For example, every single child born in America today inherits $45,000 in U.S. government debt.

Isn't that lovely?

Of course our liberal friends believe that the answer is just to raise taxes.

Oh really?

The truth is that our taxation system is deeply broken.

Small business owners and middle class Americans are being taxed into oblivion while those at the top of the food chain often pay no federal taxes whatsoever.

For example, did you know that Citigroup did not pay a dime of federal taxes in the third quarter? Meanwhile, their executives continue to bring in bonus packages worth millions.

Did you know that even though Boeing receives billions in federal subsidies every year and even though it has a bunch of juicy government contracts it did not pay a single penny in federal corporate income taxes from 2008 to 2010?

Did you know that while Exxon-Mobil did pay $15 billion in taxes in 2009, not a single penny went to the U.S. government? Meanwhile, their CEO brought in over 29 million dollars in total compensation that year.

You can find a lot more examples of this phenomenon right here.

Those at the top of the food chain are experts at avoiding federal taxes. So liberals can raise rates all they want but it won't do much good.

As I have written about previously, the truth is that approximately a third of all the wealth in the world is now held in "offshore" banks. The ultra-wealthy and the monolithic predator corporations that dominate the global economy don't mess around when it comes to paying taxes. They don't care if they aren't paying their "fair share". They simply know how to play the game and they laugh at all the rest of us.

Our entire system is broken beyond repair and needs to be reconstructed from the ground up.

But of course that simply is not going to happen.

So what can be done?

Not a whole heck of a lot.

The truth is that the U.S. economy is on the verge of a major collapse.

Marc Faber, the author of the Gloom, Boom and Doom report recently gave a speech in which he declared that the U.S. financial system is in such disastrous shape that only a "reboot" will be able to save it....

I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.

But can we just "reboot" the system and expect things to go back to normal?

Of course not.

The truth is that when the rest of the world completely loses faith in the U.S. dollar and in U.S. Treasuries the dominoes are going to start to fall. Eventually we are going to see a financial panic that is going to make 2008 look like a Sunday picnic. Our economic system will massively implode as all of the gigantic mountains of debt and paper money collapse like a house of cards.

Right now the Federal Reserve is desperately trying to hold the system together by "papering over" all of the mistakes. But in the end it is not going to work. In fact, what we are witnessing now are the very early stages of hyperinflation. A lot of other nations in the past have thought that they could just print their way out of trouble, but many of those "experiments" ended in total disaster.

Marc Faber is certainly right about one thing - all of this money printing is going to give us substantial inflation to go along with the high unemployment that we already have. This is called "stagflation" and anyone that remembers the 1970s knows that it is not a lot of fun.

But the Federal Reserve seems absolutely determined to print more money. Fed officials are doing the same thing now that they did right before QE2. They are dropping hints about QE3 and they are trying to break it to us gently.

Well, it is about time that someone told the American people the truth. All of this money printing is going to end in disaster and so you had better get prepared.

[Christian Engineer Mass]

When they print this money, who gets it?

The dollar’s going off the cliff now I take it.

[RobRoy]

Ya know, you can never print too much money!

[LibertarianLiz]

Isn’t this the classic definition of insanity; doing the same thing over and over and expecting different results? Fine, if you’re on your own dime; but this is our economy and our money -— oh, wait, they just print it. What could go wrong?

[CodeToad]

They really should just call this the Titanic 2.

[NeoCaveman]

It’s either QE3 or an end to deficit spending.

One finances the other.

And you know they aren’t going to shave a trillion plus off the budget going forward from this June.

[screaminsunshine]

And a 4 and a 5 etc. They have no choice but to inflate at our expense or blow the Ponzi.

[Farmer Dean]

Damn Democrats want to declare political war over a measly 100 billion!
This is NOT going to end well.

[dforest]

These people should be removed and arrested.

[Errant]

QE3 is going to have to be MUCH larger than QE2. QE2 @ $600 billion will only finance the deficit for about three months at current spending levels.

[screaminsunshine]

Now you know why food and energy are not in the government inflation index.

[Errant]

Yep, and exponential growth of our spending and debt is about to bite us in the butt ..

[Fantasywriter]

They’re in full on panic mode. They’re not going to be able to keep this economic shipwreck topside until Nov 2012, and it scares them witless. I have always said The Won never intended to preside over a basket-case. He thought he could redistribute wealth, promote ‘economic justice’, kill off the energy industry (except for the ‘green’ components), and create a marxist paradise. (In the fantasyland marxist paradise, the Ruling Class never runs out of Other People’s Money with which to engorge themselves and their constituents.)

Now it is crashing and burning. Yet all Obama knows is Keynes [can we finally agree he is just not that bright?], so the worse things get, the harder he doubles down. All the GOP has to do is avoid nominating a RINO, and we’ll win 2012 in a walk.

[InterceptPoint]

I posted the following a couple of days ago:

Well the Fed has encountered the classic Rock and A Hard Place and they are caught right in the middle.

Here are their choices:

1. Cool it with the QE stuff, refuse to fund the Federal Government deficits with Xerox Money. Result: Interest rates skyrocket, the U.S. Government will rapidly see their raising borrowing costs totally destroy Medicare, Medicade, Social Security and Obamacare. But inflation will be modest. Taxes won’t be. They will have to go up.

2. Keep issuing $Xerox and keep loaning to the Federal Government. Interest rates stay low. Employment slowly improves. Gold goes from $1400 to $5000 plus per ounce. Your house that was underwater at $150,000 is now going for $500,000. What’s not to like? That retirement fund you set up that was supposed to last 20 years will be gone by Chrismas? Well there is always a little collateral damage when you are doing big things with the economy. Oh, and yes, the Federal debt goes from $14 trillion to 2-3 times that in 10 years. The Government concedes that they will never be able to balance their budget. But who cares? If you lucky enough to have job it’s ‘Let the Good Times Roll’ all over again.

I’m betting the Fed will take Option 2.

[Leftism is Mentally Deranged]

Liberal “solutions” always fail, and then liberals always demand a strengthening of the solution which failed, which also fails, leading to liberals demanding a strengthening ... etc etc.

[Errant]

and we’ll win 2012

Nice username!

[2 Kool 2 Be 4-Gotten]

As Walter Williams has said - if you or I did this we’d be hauled off to jail for counterfeiting. Fed does this on a much larger scale and they call it QE. Fundamentally, there is no difference (aside from the fact that they aren’t in prison).

[SeekAndFind]

RE: Fundamentally, there is no difference (aside from the fact that they aren’t in prison).

---

One difference — They are AUTHORIZED BY LAW to print money. You and I aren’t.

[TexasRepublic]

Inflation = Robbery

Most people are too ignorant to interpret what is happening to them in plain view. This is more proof the government will continue to print greenbacks until it is worth less than toilet paper. The government knows the eventual outcome, but they hope to pass the blame onto the next administration rather than do the right thing now. Most of us are not wealthy enough to insulate ourselves in a total societal collapse or start over in another country. We are facing major upheaval in the future. Scary stuff.

[BenLurkin]

bttt