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Expect worse than that. The New York Post’s John Crudele explains the long-term consequences of the Fed’s policy. “Bernanke would have us believe his policy of endlessly printing money saved us from another Depression. But what he really did was author the Never-Ending Recession, which could morph into something much more dangerous if our currency craps out,” he writes. Yet it is Crudele’s next observation that should frighten every thinking American. “(Thursday), Bernanke gave Wall Street what it wanted–another round of ‘quantitative easing,’ which in layman’s terms is the endless creation of more dollars that are used to buy securities nobody else wants.” (Italic mine.)
It is one thing for a newspaper columnist to express the idea that the American dollar is being debased to the point where nobody else but the Federal Reserve wants it. It is quite another when the Treasury Secretary of the United States expresses the same idea. Yet if a recounting of last year’s debt ceiling negotiations contained in author Bob Woodward’s new book, “The Price of Politics,” is accurate, that’s exactly what happened. “Suppose we have an auction and no one shows up?” Geithner reportedly wondered out loud.
What indeed. The more the Fed is forced to print money to buy America’s debt, the more devalued our currency becomes. Yet Bernanke clings to his Keynesian-based ideology in the hopes that this time–as opposed to every other time–it will work. “With their home prices rising, people will start to feel more confident about spending again, and companies will start increasing activity and hire more people,” he said.
Some analysts weren’t buying it. “We doubt it will be enough to get the economy on the right track,” said economist Paul Ashworth at Capital Economics. “It’s only a matter of time before speculation begins as to when the Fed will raise its purchases from $40 billion a month.” In other words, Bernanke will be forced to print even more money, further debasing the currency, in what is becoming perhaps the most debilitating–and potentially catastrophic–vicious cycle in the history of world finance.
Fox Business Network senior correspondent Charles Gasparino explains the “why” behind Bernanke’s thinking. Bernanke “thinks it’s all worth the risk, considering the alternative: a nation falling back into severe recession because of a president with no clue about growing the economy, who thinks the best way to create jobs is to crush those who do the job-creating,” he writes. He also notes what must eventually happen in the long run. “Bernanke is well aware of the consequences of printing money…And he knows that at some point he’ll have to do just the opposite, and start contracting the money supply and raising short-term rates before full-fledged inflation kicks in. When he does, the ‘wealth effect’ of a rising stock market will evaporate, and so will the rest of the economy,” he writes. As long as that evaporation happens after the election, Bernanke will have accomplished his mission.
Maddeningly, Bernanke knows what drives his furious attempts to “save” the economy: out-of-control government spending in a nation where a dauntingly large portion of Americans either don’t know what’s going on, or don’t care–as long as they get theirs. Moreover, as Mitt Romney rightly noted, when you attack success, as this administration and the Democrat party have done at every opportunity, you get less of it. When government spends trillions upon trillions of dollars of borrowed money, it saddles Americans of this generation and future generations with an unconscionable burden, while the rest of the world looks at us and wonders when it all reaches critical mass.
Furthermore, this latest round of easing demonstrates the philosophy of government-picked “winners” who remain insulated from both genuine competition, and the consequences of their gross malfeasance. Not a single major figure has been prosecuted for the financial crisis that began in 2008, nor was a single resignation demanded or tendered from the bankers or heads of financial institutions that received TARP funds.
Thus, QE3 proceeds. It is unlikely that it will improve the economy a much as the Federal Reserve may wish. And when that becomes apparent — what then?
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