QE3 and Wall Street Couldn’t Be Happier
Wall Street, NY – The Federal Reserve has signaled to Wall Street that free money is on the way. The Fed released their meeting minutes this week and the consensus says that the government will be buying back short-term and long-term bonds more commonly know as quantitative easing or (QE3), three is for the third time The Fed has decided to implement this monetary policy in the last two years. The implication being the United States economy is on a slow and fragile recovery and fears of a global or double-dip recession are imminent and something must be done.
You know the old phrase, “if at first you don’t succeed, try and try again?” or is it “for it’s one, two, three strikes you’re out?” Which ever it is something is not right. Since the financial collapse of 2008 the stock markets have more than doubled, yet the unemployment rate is at 8.3 percent with poverty on the rise and 23 million people underemployed or unemployed.
Why such huge contrast between the financial markets and real economic growth throughout the country? While the complete answer to this question can’t be answered on a short blog let’s take a look at one aspect, QE3.
If you are at or below the median household income of the United States ($50,020) QE3 should scare the suit out of you, however, if you are a big bank, hedgefund manager or make your living off of the outcome of financial markets you couldn’t be happier because Uncle Sam is here to help.
QE3 means that the average US household will see an increase in everyday goods they purchase. Why? Well, because of the shift in supply. When The Fed buy back bonds (QE3) it floods the markets with money thus lowering interest rates for borrowers. The increase in capital artificially lowers the value of produced goods in turn lowering profits or creating losses to the producers of goods and services. As a result, producers and consumers lose money.
In turn, Wall Street makes billions. The increase in liquidity to banks gives them access to capital that wasn’t there in other words free money to borrow and invest. Thus, a bandage on a bleeding economy. The US economy is being propped up by unsustainable monetary policy. This Economy won’t fully recover until it is allowed to reset itself.
Our politicians don’t have the courage to tell us, the voters, the truth. Our economy is on the precipice of collapse, yet they keep stalling and buying time until the next election. When the shit hits the fan the middle class and the working class in the US will be decimated but not to the point of no return. There will be plenty of hurt to pass around but I expect a rapid (less than 2 years) and robust turn around.
The US economy is too big (and our economic fundamentals are too strong) to fall into a Great Depression. We should not fear another Great Recession instead we should welcome it because it will bring great prosperity to all. We must stop QE4 and any other monetary policy that doesn’t fix the problem but prolong it.
QE3 will only help the people who need it less. A robust economy will help everyone starting from the working poor to the 1 percent.
Barack Romney signing out…