Posted on 11/10/2013 12:07:29 PM PST by Zakeet
In his parting act, Federal Reserve Chairman Ben Bernanke has decided to continue printing some $85 billion per month (6 percent of GDP per year) and spend those dollars on government bonds and, in the process, keep interest rates low, stimulate investment, and reduce unemployment.
Trouble is, interest rates have generally been rising, investment remains very low, and unemployment remains very high.
Bernanke’s dangerous policy hasn’t worked and should be ended. Since 2007 the Fed has increased the economy's basic supply of money (the monetary base) by a factor of four! That's enough to sustain, over a relatively short period of time, a four-fold increase in prices. Having prices rise that much over even three years would spell hyperinflation.
The Treasury dance
... When the Treasury prints bonds and sells them to the public for cash and the Fed prints cash and uses it to buy the newly printed bonds back from the public, the Treasury ends up with the extra cash, the public ends up with the same cash it had initially, and the Fed ends up with the new bonds.
Yes, the Treasury pays interest and principal to the Fed on the bonds, but the Fed hands that interest and principal back to the Treasury as profits earned by a government corporation, namely the Fed. So, the outcome of this shell game is no different from having the Treasury simply print money and spend it as it likes.
The fact that the Fed and Treasury dance this financial pas de deux shows how much they want to keep the public in the dark about what they are doing. And what they are doing, these days, is printing, out of thin air, 29 cents of every $1 being spent by the federal government.
(Excerpt) Read more at finance.yahoo.com ...
Professor Kotlikoff has an impressive resume, including serving on President Reagan's Council of Economic Advisers. He was recently in the news for calculating that U.S. debt currently totals $211 trillion (excluding derivative exposure) vs. the claimed number of only 17 trillion.
This article is well worth a read, IMHO
Here’s the part I can never understand.
If QE is sooo great, why would they ever want to stop?
It’s gonna blow either way, just playing with the timing a little bit. With unlimited QE we can proudly go over the cliff with the throttle on the floor, instead of trying to slam on the brakes and clumsily bumping over the edge.
They are printing money because deflation is more frightening than inflation. With inflation, existing debt becomes easier to pay and income taxes and property taxes rise. With deflation, tax receipts fall and debt payments become even harder to pay.
When the Treasury prints bonds and sells them to the public for cash and the Fed prints cash and uses it to buy the newly printed bonds back from the public, the Treasury ends up with the extra cash, the public ends up with the same cash it had initially, and the Fed ends up with the new bonds. and there it is...
Maybe it allows the cronies time to make money and then get out without losing their shirts.
Sorry to be a cynic but I really don’t think that they are that concerned about the average American.
Yeah I’m “all in” on inflation.
I pulled all the equity out of my house and refi’d at 3.75% fixed 30 yr.
James Earl Carter taught me about inflation, LOL.
Real income is down 5% since O arrived on the scene. The American public can not fuel inflation. Something else will have to give.
This might be interesting.
I think we've already gone over the cliff. What we are trying to do now is negotiate a softer landing. Landing in the water instead of the rocks below.
And that includes the public debt. Basically, it's a way to help pay down the public debt by, in part, sucking the value out of people's retirement savings.
The classic: 
Weimar days are here again.
Us, too. Just refi’d for 30 years at the same rate…and we are 62 years old! Now trying to figure out how to preserve our liquid assets and avoid having them become a useless pile of dust leaving us destitute in retirement.
He did say that the spending and taxes would have to be lowered but not until after the debt zeros out. He claimed the additional revenue and spending cuts would also solve the social security issue as well.
He made a pretty good argument but I know the left would never stop spending or cut any taxes?
Old Charlie even argued with him because he didn't agree with future tax or spending cuts.
Yes and the deflationary pressure right now seems enourmous. After TARP and all the stimulous and printing we should already be in hyper inflation. I am leaning toward the deflationary depression theory.
That is a Keynesian analysis.
Perfectly understandable since every one of us born since 1935 has lived his entire life in a Keynesian world. But monetary deflation cannot take place as long as the Fed is "printing" money.
In my opinion, deflation [of the price variety] is to be welcomed -- not feared. It means that the purchasing power of the dollar is increasing. I don't think we're anywhere near that.
An economics major we know says that Obamacare insurance mandates will further the deflationary effect. Taxes are deflationary, and the higher health insurance premiums suck up money without producing value. Thus, more deflationary pressure.
The stock market is rising, sure. But the elite who finagle those things will pull their money out when it's maximized and "games up". The other thing is to get to that money anyone invested in the stock market has to pay capital gains, so it isn't really as much as it seems.
tx bro!
At first glance I thot that was crazy --I mean, taxes raise prices & that's inflation --and sometimes it is, but these days the taxes are making folks not buy and it's depressing the economy. These days the broadest measure of the money supply is at an all time high, but the money velocity is dead and that's why there's no inflation.
OK, so the fed can issue money and buy back T-bills from the public, but until people actually use that money we're not going anywhere.
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