Fed Planning QE3?: Don’t look now but it seems that the Fed might be planning some more economic tinkering. Just the sort that always seems to explode our cost of living by destroying the value of our dollars. And it occurs to us that the actions of the government and the Fed over this crisis should forever put to bed this myth that capitalism promotes materialism and consumerism above all else. If we had capitalism in this country the price of money would revalue itself to make it more difficult to consume. It would make it more advantageous to save. And this trend would continue until actual wealth could again support spending. But we don’t have capitalism in this country. We have something else entirely. A system that punishes savings by devaluing the currency. A system that promotes materialism and consumption above all else by first making the money cheaper than it should be, borrowing from other countries to extend the spending that wealth cannot provide for and finally -when both of those other options have failed- cranking up the printing presses.
This post was last modified on November 6, 2011
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"At his news conference yesterday, the Fed head emphasized the ongoing weakness in housing as a key factor in the sluggish economy and high unemployment rate. He openly acknowledged that the door is wide open for a new Fed action to purchase mortgage-backed bonds in order to provide additional support for the weak housing market. This goes beyond Fed actions to reinvest MBS bonds as they mature. In other words, quantitative easing."
Great, the Fed buys MBS from banks and others that own them, theoretically freeing up money for more mortgage lending. If the problem with housing was lack of mortgage money, this would help. But the problem with housing is that nobody wants to buy houses because they are afraid of losing their job or because they don't HAVE a job or because they can't get rid of the house they already own. And the psychology of housing has changed. Back in 2005, everybody wanted to get in on housing because everybody "knew" it was gonna keep going up and they were gonna get rich. Now, everbody "knows" that houses are crummy investments and if you buy one, it's gonna be cheaper next year and it's gonna be years before you get your money back (if ever.)
The Fed buying MBSes does nothing to change any of that. How could it? It does make the bankers who are stuck with the damn things happy, though.
Is it 2012 yet?
Honest to God, if this psychopath is reelected I'm gonna go teach English in South Korea. At least maybe I'll get a chance to get in a real shooting war with Reds, instead of suffering the Red Death of a Thousand Cuts.
Fixed it. Thanks for the heads up and good analysis!
Your link 404's.
The Fed has obviously not heard the maxim "you can lead a horse to water but you can't make him drink." The Fed can indeed drop money out of helicopters but they can't make people spend it. In fact, these types of actions may actually suppress economic activity because folks get nervous when times are bad, and the more dramatic actions that are taken, the more nervous they get. And nervous people hoard money, they don't spend it. This is exactly what happened in Japan. Two decades of Keynesian failure there prove nothing.
"Your link 404′s." Not any more, its fixed, column at Townhall.