Did you feel it?
Feel what, you ask.
I’ll be blunt: Did you feel screwed? Because that’s what happened two days ago, on Thursday. As Peter Schiff, president of Euro Pacific Capital, writes: “September 13, 2012 may one day be regarded as the day America finally threw in the economic towel” as a result of Federal Reserve Chairman Ben Bernanke setting loose QE3.
I know your eyes tend to glaze over at words such as “Federal Reserve,” “monetary policy” and “QE3”. But you need to pay attention because that’s precisely what our government is counting on, which then enables them to fiddle with monetary policies like QE3.
QE is Quantitative Easing; 3 refers to this being the Feds’ third QE because two previous Quantitative Easings had failed at jump-starting America’s stalled economy, which then of course calls for yet another QE. [Snark] Nothing succeeds like failure!
According to Wikipeida, Quantitative Easing is a monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of the banking system, generally through buying of the central government’s own bonds to stabilize or raise their prices and thereby lower long-term interest rates. This policy is usually invoked when the normal methods to control the money supply have failed, e.g. the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero.
Did you understand that? Me neither!
What I do know is that, from teaching (for many years) a college course on the political economy of Japan, Quantitative Easing was used unsuccessfully by the Bank of Japan (which is really the Japanese government) to fight deflation after the bursting of Japan’s “bubble economy” at the end of the giddy 1990s. Today, Japan’s economy, sadly, remains in the doldrums. So much for Quantitative Easing.
Below is an op-ed by a guest writer for FOTM, Dave McMullen, who’s one of our regular commenters. Following Dave’s op-ed is a great video that explains what the euphemistic term “Quantitative Easing” means. It’s a hoot. Highly recommend!
QE3: The Next Rip Off of the American Middle Class
By Dave McMullen
This week Ben Bernanke announced that the Federal Reserve bank will begin to spend 40 billion dollars a month (with no cap on spending) to buy mortgage-backed securities. [Note: A mortgage-backed security is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization.]
Once again, our government is asking taxpayers to buy the same toxic mortgage-backed derivatives that caused the crash of our economy back in 2008. Once again we are being forced by our government to bail out the same criminal financial institutions, whose criminal conspiracy had caused the collapse of the housing market and the ensuing recession in the first place.
The government now wants to own these properties, but remember the money from the TARP (Troubled Asset Relief Program) bailout of 2008 could have easily purchased all of them, and at the least, taxpayers would have owned the assets. But the government chose to give the money to the banksters, with little or no regulation on how the funds were to be used. TARP may have helped the banks but it was a disaster for our housing markets: 80% of U.S. homebuilders were bankrupted; the average home lost 30-40% of its value.
This devaluation of our real estate was caused by the worthless money printed by the Federal Reserve bank. In other words, the Obama administration virtually stole the equity from every U.S. homeowner to bail the banksters out.
So now the government is doing this all over again. The Federal Reserve will print more worthless Fiat currency to buy these same toxic mortgages and the results will be the same. QE3 will further devalue our real estate and our money, thereby causing more inflation that will lead to more unemployment.
How much more can our fragile economy withstand?
TARP Failed. QE1 and QE2 were models of political corruption. QE3 may well be the “straw that breaks the camel’s back.”
It may be time to pick up the pitch forks and march on Washington. But at the least, call your Congressmen and tell them “NO MORE!”.