Posted on 09/14/2012 10:52:43 AM PDT by xzins
We have been warning conservatives about Federal Reserve Chairman Ben Bernanke’s taxpayer-funded Super PAC that has so-far pumped something like $2 trillion into the economy to help re-elect President Obama.
Yesterday, the Fed doubled down on this failed strategy and announced an unprecedented plan for an open-ended round of Quantitative Easing (QE3) and extended the period for which it will keep interest rates between 0 and 1/4% to mid-2015.
What this means is that the Fed will print money at a projected “burn rate” of $40 billion a month until… forever.
Here is one of the key paragraphs from the Fed’s Open Market Committee statement from yesterday, Thursday, September 13, 2012:
"....The Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions...should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."
As finance writer Jeff Macke pointed out in a column on the FOMC announcement, “Unlike QE1 and QE2, no dollar amount or time-limit was placed on the program. The Fed essentially announced it will be purchasing $40 billion in MBS per month until further notice.”
The Fed tied the end of the program to a substantially improved “outlook for the labor market.”
Given the job creation results Obamanomics has achieved so far, “until further notice” could be a very long time.
On average, Obama’s so-called recovery is adding less than 66,000 jobs a month -- or about half of what’s needed just to keep up with population growth. And, despite some growth in manufacturing employment, we are still a half a million jobs down from our pre-Obama mark in that key metric.
To keep up with population growth and get 23 million unemployed and under-employed people back to full employment would take a staggering level of economic growth. The American economy would have to create better than 600,000 jobs a month over the four years of a second Obama term.
As Jeff Macke said in his column on the Fed’s announcement, “There's a certain willful spunkiness to the plan, but in terms of economics it's little short of bizarre.”
It is bizarre unless your goal is to re-elect President Obama.
Pumping something like $3 trillion into the economy through the Fed’s three quantitative easing programs -- on top of Obama’s $5 trillion in federal deficit spending -- has managed to inflate the value of all kinds of assets: oil, gold, the stock market, commodities in general...
This inflation looks like growth to the Obama apologists in the establishment media, but it hasn’t put real people on Main Street back to work.
The good news in all of this is that Governor Mitt Romney spoke against Bernanke’s inflationary strategy and has vowed to replace Bernanke if he is elected. As we have said before, and will keep repeating until the polls close on Election Day, we should all work hard to make sure Romney gets the chance to make good on that vow.
NPR has been pretty darned excited about this event. There’s really no dounside to it — blue sky and rainbows all around, and no ugly politics of any kind. It’s just good economic sense, you see.
isnt there something the house can file to hold that up?doesnt anyone thing thats a lot of money..
The Fed is independent, so they can create money whenever they wish.
or: "Insanity: doing the same thing over and over again and expecting different results."- Albert Einstein
Okay let’s think about this. the premise is that QE-Infinity is designed to help Obama’s reelection. Yet it’s mid-September and the fed said it would buy $40Billion in MBS’s per month. Before the election you are looking at $80 Billion. QE1 and QE2 were both $600 Billion in UST purchases. The $80 Billion is a mere 13% of the former QE programs isn’t going to make any difference in a $13 Trillion economy and over $10 Trillion in M2.
Once again, Bernanke is a student of the Great Depression. His doctoral work shows that the Fed’s tightening in 1936-37 that tripped off the 1937 recession. He is doing QE-Infinity in order to signal to the market that he will supply whatever liquidity necessary to the market. This doesn’t have to do with politics.
Just in time for the election there will be a falsely buoyant market.
Don't pundits and politicians running for office often look to the DOW to tell the voters how our economy is doing? What has just the announcement of QE3 done to the markets? That's not pure politics?
The markets have been rising since mid-2009. DJIA is up 30+% in the last year. S&P is up 40+% in the last year. NASDAQ is up close to 50% this year. All of QE-Infinity is completely priced in. Yet Obama is still in the mid 40’s.
QE-Infinity has been priced in for weeks.
ANYONE WONDER WHY WE ARE SO HELPLESS AGAINST OUR GOVERNMENT?
https://twitter.com/JimPethokoukis/statuses/246671727063605249
Interesting to get a low interest mortgage locked in before inflation hits,
then when it does hit, you, in essence, are being paid to borrow money.
Of course, the financial system will soon collapse on this model, but we can’t really do anything about that except to position ourselves in the best place to ride it out.
Me? I’m buying a cow.
Let’s get the obvious out of the way, shall we: Ben Bernanke and his fellow FOMC board members did the right thing yesterday. Sure, it was the unpopular thing to do, but Ben put his foot on the gas and basically said this bus isn’t stopping until he’s comfortable the economy can prosper on its own.
You may ask what his definition of ‘comfortable’ may be. Well, during yesterday’s press conference, Bernanke offered a number: 7. He wants to see 7 percent unemployment, not the current 8.1 percent. Keep in mind, the unemployment rate has been stuck above 8 percent since February 2009 when the country was planted in the middle of Recession Island.
The details of this recent monetary policy move, otherwise known as QE3, are quite simple. The Fed, beginning January 2013, will purchase $40 billion of mortgage debt per month and maintain a ‘zero-interest rate’ environment well into 2015. You’d be naïve to think rates will be shifting higher, including mortgage rates, any time soon. So, if you’re waiting to obtain a mortgage to purchase a home, well, feel free to keep waiting.
Several pundits were calling for the Fed to pull the trigger at this month’s meeting. Personally, I figured why rush the deal. Bernanke has authored many papers describing the diminishing returns of overlapping monetary policy moves. And, considering ‘Operation Twist’ is humming along until December 31st, why announce something now when they won’t implement until the new year.
But Bernanke didn’t have a choice. The catalyst that brought this on was Friday’s abysmal jobs report. The economy is slowly dying, not like 2008 when Lehman’s collapse set off a chain of broken fiscal events that seemed to take only days to solidify. The economy isn’t just stuck in quicksand, it’s literally drowning.
So, who better to throw a lifeline than the one fella who’s been playing superhero all along: Ben S. Bernanke. The risk for the Fed is the ‘unlimited’ language. Bernanke’s term is up in January 2014, and Mitt Romney has made public statements about the Fed Chairman’s future if he is elected President. To be blunt, Bernanke will not be asked to return.
If Obama is re-elected, it’s safe to assume that yesterday’s action will continue well through his entire second term. Therefore, Obama will be the only President in history to have monetary policy easing take place for his complete duration in the White House. This is a topic for another time, though.
For now, it’s about manufacturing growth and wealth in America. There’s nothing organic about the economy; it needs stimulus and doesn’t appear to be showing signs of breathing on its own for years, if not a full decade, from now.
I’ll leave you with one final thought: Yesterday’s move did prove that Bernanke is the only man working these days in DC. The President and Congress continue to show incompetence and had it not been for Bernanke, this economy would be toast. At least someone is being proactive in that town. So, keep it in mind, because the Chairman is about to get slammed by the GOP and the media in the days to come.
The following is not mine and is from: http://www.learnbonds.com/qe-raises-interest-rates/
What is unique about this particular case is two things:
1. As the Federal Reserve buys up treasuries, they are simultaneously increasing the supply of money. More money chasing the same amount of goods and services increases the price of those goods and services. The market knows this, so when the Fed embarks on QE, inflation expectations increase, sending interest rates higher.
2. More money available to buy goods and services should also mean a pickup in the economy. As people adjust their growth expectations they pull money out of super safe assets like treasuries, and put that money into riskier assets like stocks. This is why the stock and bond market normally have a negative correlation. When the stock market is going up the price of treasuries is normally falling, meaning interest rates are going up.
LOL! You are exactly right. I had an economist tell me last month to buy up all the hard assets I can now because rates are so low and then when inflation hits you will be paying the loans back with inflated dollars and you will end up getting rich because the assets will be inflated.
That only lasts until the big crash, though.
So those hard assets better be getting you prepped for hard times.
Thus the cow...
That’s exactly correct. Following the hedge fund guys they call this move RISK ON. the current issue is that the equities markets don’t move on news it moves on rumor. The markets have been expecting QE3 for weeks. It was solidified last Friday with the horrible jobs report. Remember that bad news is good news in a QE(n) environment. The good thing that the Fed did is that they made it open ended which: a) provides Bernanke the ammunition to provide whatever liquidity they think is necessary for as long as they think is necessary. b) It eliminates the future market expectations for QE(n+1).
The FEDS are part of the Government's balance of Power. Somehow the FEDS come under someones jurisdiction, am I wrong?
If not there is no Balance of Power.
All nonsense.
This will net = Zero jobs, zero increase in industrial output & zero effect on housing.
The rates have all been very very low for a long time.
What this WILL do is cause an immediate uptick in commodity prices such as oil - look for future to reach new highs.
And in all of those things that little bennie doesn’t call inflation like gas and food.
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