Thursday, November 4, 2010

Funny Money: Feds to spend another trillion to buy our own debt

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.


Just Me said...

We closed our small business this year. A part of us was really sad; the other part was almost relieved to be off the radar.

All I can say is end the Fed. then, and probably only then, would we ever entertain the idea of opening another business.

Steverino said...

This is Obama's solution to the debt problem: monetize it by inflating our money supply so much that the debt seems trivial. Look for very high inflation throughout the next decade.

Chris said...

Our debt will be much easier to pay off once this takes effect in our economy. But we wont be able to buy a galon of gas for $10 to go to work. The rich are getting richer and we are getting screwed by the Democrats again. This will make a lasting recovery almost imposible. We need to remind people what the Democratic Party did and the effect on our recovery their actions took.

Anonymous said...

Didn't someone said stupidity is to keep on doing the same thing expecting a different result?

Are they stupid, or just nuts.

2nd Anony

Anonymous said...

So we are borrowing fake money from the fed to balloon our debt. And thereby further driving up food prices and gold prices as the app ExactPrice shows.

Really insane to me to think that we are heading down this path further when it was quite obvious that the first round did nothing but act like a jolt of heroin for an addict.

joetote said...

The Fed promised not to monetize the system. Oops! Lie there. This brings the total printing of bogus money to 1.8 Trillion dollars! Our currency will devalue by about 20%. They tell us this (Quantative Easing) has never been tried. Moron Aler?! History shows us Germany, Argentina and others who did in fact do the exact same thing! Print phony money and destroy their nations! They announced today we do not need to fear a double dip recession. Well, there's a bit of truth there. We're going to go directly into a depression as always happens when governments print phony money! This is one of the scariest things to happen to this country in my lifetime.

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