QE2 And The Death Of A Nation
November 8, 2010 by Bob Livingston
Check those green slips of paper in your wallet. If they look a little smaller today, it’s because they are.
Helicopter Ben Bernanke announced last week he’s throwing more money out of the sky — $75 billion a month — as he tries to spur inflation to “save” the economy. It’s called QE2, for the second round of quantitative easing.
That’s a fancy term for printing more money… or, to be more factual, pushing a computer button that says the Federal Reserve has $600 billion more to buy “government debt.” This government debt is in the form of U.S. Treasuries that the Fed will buy over the next eight months. This is akin to your paying off one credit card with another.
According to The Wall Street Journal, “The Fed’s first $1.75 trillion bond-buying program, which ran from Dec. 2008 to March 2010, is credited with helping the economy when the U.S. was hit by a financial crisis and a deep recession…
“By buying government bonds, the Fed aims to keep long-term interest rates low, hoping it will lead consumers to spend and companies to invest more, thus helping to propel the economy forward… The Fed said it expects to buy between $850 billion to $950 billion Treasuries through the end of the second quarter of 2011,” The Journal writes.
The Fed says the current inflation rate is at 1.2 percent for the year, but would like to see inflation near 2 percent, and Helicopter Ben believes he can manipulate the currency just enough to raise inflation to a manageable level then cut it off when it gets just right.
Not everyone is on board. Former Federal Reserve Chairman Paul Volcker told The Associated Press the U.S. central bank’s plan to buy hundreds of billions of dollars in government bonds probably won’t do much to boost the economic recovery. It will boost the portfolios of Bernanke’s bankster buddies, however.
Kansas City Fed President Thomas Hoenig believes the risks outweigh any potential benefits.
"Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy," according to the Fed’s statement.
Higher inflation drives down the value of the dollar which makes our exports more competitive. However, it makes our imports more expensive. What do we import? Just about everything.
It also makes China, the holder of much of our debt, angry.
“China’s commerce ministry fired an irate broadside against Washington on Monday (Nov. 1). ‘The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a ‘currency war’. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate,’ it said,” writes Ambrose Evans-Pritchard, in The London Daily Telegraph.
Inflation also lowers the amount of interest that savings earn, hurting savers and those on a fixed income. It drives up prices, further hurting those on fixed incomes — and all consumers. Already, inflation exceeds the amount that “safe” investments earn, meaning if you have your money in a bank, money market or certificate of deposit, you are losing money — quickly.
Inflation is a transfer of wealth from the producers and savers to the government. It is theft and a crime just as much as if by the point of a gun.
Anyone who shops knows inflation is real… and it’s higher than 1.2 percent — or 2 percent. The price of gasoline at the pump is up about 20 cents since the beginning of September. Groceries have become incredibly expensive. But Government hedges its figures and makes them say what it wants them to say. It conveniently excludes food and energy — the things that Americans consume most — from the equation.
Inflation affects prices across the board, not just those in the Fed’s “basket of goods.”
In the past 60 days alone, cotton prices are up 54 percent, corn prices are up 29 percent, soybean prices are up 22 percent, orange juice prices are up 17 percent and sugar prices are up 51 percent, reports the National Inflation Association. In the last month crude oil is up more than $4 a barrel, and it’s projected to climb another $15 by year’s end. Meanwhile, the Dow Jones has only gained 10 percent.
According to the N.I.A., “When our government creates inflation with the goal of generating higher incomes, the real incomes of Americans always decline dramatically. Inflation never creates wealth, but instead misallocates resources that would have went (sic) towards productive purposes if the free market was allowed to operate.”
Few Americans realize that American finance is nothing more than a double Ponzi scheme. It is already widely known that the U.S. is creating debt and “financing” this debt with newly created debt. But can you believe that debtors (Governments) are now simultaneously creditors with so-called “intragovernmental bonds?” This is the extreme opposite of intrinsic value. It is without value and only pretense or Ponzi. This is no joke, folks. It is the world that Americans live in.
A Ponzi scheme goes on as long as its growing fragility does not prick public trust. As we know, Bernie Madoff’s scheme only collapsed when individual creditors had liquidity problems and needed to withdraw funds. Of course Madoff didn’t have a printing press to keep the Ponzi scam going. But the printing press makes the U.S. financial system at far greater risk and deception because economic collapse may be extended into a later holocaust of Biblical proportions.
Helicopter Ben’s quiver is out of arrows. He’s learned nothing from history and obviously doesn’t really understand economics. However, Obama thinks he’s found a way out. His eyes are on the billions of dollars in Americans’ individual retirement accounts and 401(k)s. His National Commission on Fiscal Responsibility and Reform is eyeing a European-style valued-added tax (VAT). It’s European, so Obama is bound to like it.
And then there is the Debt Free America Act (HR 4646). It’s a bill that would put a tax on all transactions involving a payment instrument — check, cash, credit card, bank transfer, stock, bond or other financial instrument. This bill is in committee, and would be one of the means a lame duck Congress could use to try and cut the deficit.
To add insult to injury, two days after Bernanke and the Fed announced they’re further devaluing the dollar — on Nov. 5-6 — we learned that there was a Fed celebration happening on Jekyll Island, where the Fed was spawned 100 years ago. Bernanke, former Fed Chairman Alan Greenspan, Goldman Sachs manager director E. Gerald Corrigan and the heads of the regional Federal Reserves attended a conference called, “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve.”
It’s like the criminals going back to the scene on the crime’s anniversary date.
Formed to better manage our nation’s economy and prevent boom and bust cycles — at least that’s what Americans were told at the time — the Fed is responsible for every boom and bust cycle since.
So Helicopter Ben is trying to start a new boom cycle, hoping through inflation to artificially generate more spending by businesses and drive money into the stock market. He wants a new bubble — like the one Greenspan created in housing when he first lowered interest rates in an effort to paper over the Fed-induced recession.
The U.S. middle class is being impoverished by dollar depreciation. This will have to end one day. It will not end well.