The Wall Street Journal: The Federal Reserve announced a bold plan today to try to invigorate the economy by buying $600 billion more in Treasury bonds.
The Fed said it would buy the long-term government bonds by the middle of 2011 to further drive down interest rates on mortgages and other debt. This is in addition to an expected $250 billion to $300 billion in Fed purchases over the same period from reinvesting proceeds from its mortgage portfolio. ...
One of the great challenges facing Republicans over the next two years will be to get America off the sinking ship QE2. I am not talking about the Queen Elizabeth 2, I am talking about the foolish and dangerous fiscal policy called Quantitative Easing. Quantitative Easing is just banker speak for devaluing the dollar by running the printing press. Printing money to pay off the debt is basically what Third World nations do before they go bankrupt.
The problem here is that each and every time the Fed prints up money they don’t really have, the actual money you and I really have decreases in value. The scheme the Feds are trying to pull off is to lower long term interest rates and get people to start borrowing money again. To me this shows a basic lack of understanding as to why people are not borrowing.
I am a small business owner and I can tell you I won’t borrow a dime now because I have no idea what tomorrow is going to bring. I have no idea how my business is going to fair over the next few months in this economy and I have no idea what my tax rate is going to be next year. Without any certainty in these matters why on earth would I want a loan note hanging over my head? If the Feds want people to start borrowing again, they have to create a climate where people feel safe doing so. Currently it is just way too risky to extend yourself.