Never-Ending Quantitative Easing: Printing Money

Posted: September 14, 2012 by ShortTimer in Economics, Politics
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From FOX Business:

The Federal Reserve on Thursday, in an effort to target stubbornly high unemployment, offered an array of open-ended stimulus programs designed to keep interest rates low until an economic recovery gains significant traction.

In a strategy shift, the Fed’s latest round of quantitative easing, commonly referred to as QE III, will target mortgage backed securities rather than U.S. Treasuries. And, importantly, the Fed said it plans to keep interest rates low even after a recovery gains momentum.

The Fed statement said it “expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”

During a press conference Thursday afternoon, Bernanke said the new open-ended policies are designed to “assure the public that the Fed will remain accommodative long enough to ensure recovery.”

We don’t have a single number that captures that, but we anticipate that we’ll have to do more and we’ll do enough to make sure the economy gets on the right track,” he added.

Except it didn’t work with QE1.  It didn’t work with QE2.  It’s applying more of the problem and calling it the solution.  Nothing good will come of this.  It will promote some short-term excitement, but ultimately, it devalues the dollar and kicks the can down the road.  Helicopter Ben can’t keep inflating money against and as real capital that isn’t there, and Mike In East Texas’ warnings of freefall deflation or the consequences of not resetting will eventually mean that when we will have to take our medicine it’ll be that much worse.  More like Zimbabwe and less like Greece.

Update: I should also add that the way much of this will work is to get bad debt away from the big banks, so it’s also a bank bailout as well as a loan and debt-buying scheme.  It all hangs on a recovery that will not happen because of the uncertainty it creates, the unstable entities it keeps alive, and the knowledge that politics and pull are running economic policy.  Nothing good will come of this.

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