If you read the details of the latest from the Fed plan you will see the new QE 3 is just more transfer of wealth to banks. The US Dollar and taxpayer lose again. The whole Fed policy is such a blatant attack on the economy since the Fed is also paying Banks not to loan money. If you read the "reserve requirements" details from the Fed it shows how they are making sure loans are thin at best to business. This all looks like a set up to me, with the US economy as the target. You don't see any of the broken two party system talking about this.
QE3, like 1 & 2 is buying assets from banks and holding them on the feds balance sheet. There is no transfer of wealth. It is to free up capital to banks to "hopefully" lend. Which, that is up to the banks. The assets the fed buys are real and not just giving free money to the banks with nothing in return. But, the fed has to print the money to buy them...that's the rub.
The reason the QE is being given tot he banks is because they know there is bad debt that will cripple them. They are using it to prop up the banks to pay depositors. I don't think it is stimulus rather than an attempt to prevent the system collapsing. I wrote about that here. http://morganisteconomics.blogspot.co.uk/2012/08/debt-and-pay-there-has-to-be-balance.html From the article I linked. "When the economy contracts and the money supply falls, the ability to pay back the owed debt declines and in many cases fails. I have my suspicions that all of the efforts made by Central Banks and Governments to 'stimulate' the economy have been to address the issue of the inability to repay private sector debt, rather than to make the economy grow, which they claim is their real agenda. One method of making the repayments more affordable is to lower the interest rate, which has been done to an extreme degree as any further cuts would make the interest rate negative." I provide an alternative to QE in my article.
i'm simple man with zero knowledge of economics,but if understand things correctly FED is buying non performing junk from banks and give them more real money to make more loans. how is this beneficial for fed? and US as a country? aren't fed represent same bunch of private banks? looks like all they do is just shoveling money from one pocket in their pants to another.. question-banks already in deep sh**t and anyone who want to buy a house and mortgage-got one..to whom they are going to loan? to same losers,who can't pay for a first one? cause everyone else is paying his..now-folks who are paying-they might refinance and that's what happening now(see zillow page on mortgage rate -see volume increase like X10,compared to volume 2-3 years ago). but! every refinance cost you a lot of money. that's #1..and as we go closer and close to zero on mortgage rate-the effect of those QE's will be less and less. cause 0.5% difference won't do anything for mortgage holder. make no sense for him to refinance..even if there is a some savings-they will be offset by increase in price for everything else,cause of this money printing..and it's kind of bold statement, that even FED knows,that US economy can't recover on it's own,regardless to all previous help from them. cause the core of all economic problems is in DC,not on main street. give them jobs,lower taxes on small businesses(cause big ones aren't' paying anything anyway). make the country more " pro small business" then they will hire and after that -people might think about buying a house
BUBBLE ben bernanke and friends have so far bought $2,300,000,000,000 in government and housing related debt. That is why rates will stay at historical lows not until 2012, not until 2013 or 2014 but 2015 even that is a lie because each year that goes by they will just keep pushing out the date they will be raising rates, so in reality rates arent going anywhere until at least 2020+, this is going to be more than a lost decade.......
I thought it was $40 bill a month? Regardless, when you are running in the trillions, and devaluing your money, I guess I have no idea what the point of this move is. It sounds good on tv? Cripes the hole just keeps getting deeper.
Well not entirely, the Fed has income from their assets. A number of months ago at a hearing Bernanke, when asked about "printing", i.e., expansion of the money supply, said he wasn't. I didn't quite understand that, because surely at some point there has to be some monetizing. Regardless the Fed does have quite a bit of income from assets, and their bond holdings have obviously appreciated. Their bond desk is a net buyer, but that doesn't necessarily mean that they couldn't sell some of their inventory at an opportune time. Perhaps someone who follows day to day Fed operation can explain what Bernanke meant when he said he wasn't "printing". (Of course we all know this is figurative use of the language. It's the mint, which is controlled by the Treasury, that does any actual printing.)
The banks' reserve requirements are undergoing a rule change; they are going to have to have more cash. They park their cash in Treasury notes. This money will stimulate purchases of Treasuries and indirectly prop up the Federal Government's debt. The Federal Government got a downgrade in it's debt rating from one analyst today, not sure if that will have a big impact on the interest rates they pay on the money they borrow to make their debt payments or not. As long as they have the low interest rates and buyers for their debt they can continue the circus. It doesn't seem likely that either political party will do much about the size of government. The Democrats most certainly won't, the Republicans are caught in a bad situation wherein if they don't spend on the things they value the Democrats will most certainly spend the money on things that the Republicans don't value so Republicans are forced to be spenders or capitulate to Democrats. I'm thinking that inflation is being staved off some more. Long Cycle theory tells us that we should have inflation about 46 years after the last time we had it, that would be about 2025... it might work out that way...