How can Federal Reserve Chairman Ben Bernanke justify his decision to approve another round of quantitative easing by citing the lack of an assured recovery in the U.S. economy? How can he pretend that his decisions to continue or discontinue the wholesale printing of money and to maintain or end zero-interest rates have anything to do with unemployment or the inflation rate?
The obvious fact is that quantitative easing — which has been going on for over a year now — is not filtering down into the mainstream economy. Whether or not other forms of trickle down work, this one sure doesn’t. The quantitative easing has done nothing to increase the anemic growth rate which remains mired in the 1-2 percent range despite the printing of $85 billion each month. The flow of newly minted money goes directly into the top echelons of our financial establishment — banks and brokerage houses — and stays there as the nation’s richest executives use the funds to pay for their gambling habits in stocks and derivative bets.
Crony capitalism has taken over the government. The Fed prints the money. The money is given away for no interest in exchange for moribund mortgage-backed securities. The recipients gamble the night away playing the stock market and the $1.4 quadrillion derivative market, content in the assurance that, if they fail, the feds will guarantee them and prop them back up. Too big to fail covers their downside risk. Free money encourages the upside gambling.
Record bank profits amid a stalled economy attest to this ongoing misdistribution of resources. Crony capitalism, the offspring of big government, advances with it in tandem, making the very rich much richer and leaving the rest of the economy in dismal shape.
The stock market — recipient of the funny money — has investors hypnotized. They pay no attention to the near-zero economic growth rate or the miniscule job creation numbers, instead focusing on the dizzying heights of the Dow’s daily record highs. But the Olympian levels are themselves artificial, impelled by “QE3,” which puts free money in the hands of the banks and brokerages that they can invest in the market as they wish. At some point soon, they will tire of the game, pull their money out, and the market will crash.
Quantitative easing increasingly resembles the foreign aid program. The U.S. taxpayer sends tens of billions overseas in the idealistic expectation that the money will alleviate poverty and suffering in the third world. Instead, dictators and petty tyrants pocket the money and send it abroad to their Swiss bank accounts for safe keeping, all the while pleading for more aid to their countries’ poor.
When Bernanke says he will end “QE3&Prime when the unemployment rate drops to 6.5 percent or inflation rises above 2 percent, he is citing ridiculous and irrelevant yardsticks. The only way unemployment is going to drop in an economy as moribund as this is if sufficient numbers of us are persuaded to give up looking for work and drop out of the labor force as a result. The inflation rate will likely remain comfortably below 2 percent as long as food and fuel are excluded from its calculation, the two most inflation-sensitive aspects of our consumer spending.
Of course, Bernanke is not limited by these statistics. He is limited only by the greed of his cronies, so “QE3&Prime will continue on and on.