This monetization of the debt, or quantitative easing scam that is being run by the Fed and Bernanke crew is one smooth con. This is pure Grifter heaven. The Federal Reserve Bank of NY creates money out of thin air to buy US. debt with the stroke of a key and a new computer book entry. They will then use this newly created money to buy all of the new US debt.
Monetization dilutes the value of financial (paper) assets. The Fed is robbing the frugal (savers) to pay-off reckless debtors, and bailout their bankster buddies. The toxic assets still sitting with the banks become less toxic with monetary dilution. A by-product of this government grifter scam is that value of the US dollar is wiped out. Currency debasement is the polite thing to call it. This is the perfect double bluff grift.
Meantime, the great American public will be like the proverbial frog in the pot of cold water, who is slowly boiled and cooked to death. Americans won't perceive the danger until too late. We are being defrauded by this confidence game run by the Fed. "QE2" is a boat ride to hell.
Items of Interest:
David Stockman / Minyanville:
Monetizing All the Debt, All the Time -- In the olden times -- say three years ago -- the idea of 100% debt monetization would have been roundly denounced as banana republic finance. No more. Earlier this week, William Dudley, who occupies the Goldman Sachs permanent seat on the Fed’s Open Market Committee, helpfully clarified that the new-age Fed should be judged by what’s in its heart, not what’s on its balance sheet. He said:
I am mindful of concerns… that [the Fed’s actions] could be interpreted as a policy of monetizing the federal debt. However, I regard this view to be fundamentally mistaken. It misses the point of what would be motivating the Federal Reserve.It's doubtless true that the New York Fed Chairman, hereafter referred to as B-Dud in keeping with his brand of monetary doctrine, has run the Fed model and determined that each $100 billion of QE2 will result in a 9.895564 basis point reduction in the 10-year swaps rate. Still, B-Dud and his gang of merry money-printers on the Open Market Committee should be under no illusion that they have ascended to a new rung on the ladder of central banking sophistry...
These are pretty pathetic reasons for issuing massive quantities of digital greenbacks. Like all other experiments in printing press finance, its main impact will be to give a destructively erroneous signal to fiscal policymakers on both ends of Pennsylvania Avenue: Namely, that chronic, trillion-dollar deficits don’t matter because the Fed is financing them for free.
As I Was Saying: It’s Not, NOT a Growth Story -- Quantitative easing, once again, won’t create economic growth. It will just reprice assets. In the Keynesian model, it is supposed to drive money out of safe-haven refuges (which have a negative real return) and into brick-and-mortar and, presumably job creation. What it does, in fact, is turn gold into a safe haven, and force an increase in the savings rate! That’s because prospective pensioners who thought they could retire with a 7% annuity are looking at a 4% annuity instead. They simply have to save more, and that’s bad for consumption. The cost of money isn’t the main obstacle to job creation. Obamacare and associated regulatory burdens are the big problem...
Why QE2 Isn't the Answer -- What's that great ship coming over the horizon to rescue us? Is that the QE2? Or is it the Titanic?
Paul Farrell / MarketWatch:
The Federal Reserve Is Dead, Maybe by 2012
Editorial / Investor's Business Daily:
As Fed Prints Money, Gold and Oil Soar
David Callaway / MarketWatch:
A Race To the Bottom In Currency Markets
Doug Kass / TheStreet:
The Fed's Faulty Easing Policy Is Pumping Up Assets