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Tuesday, November 16, 2010

Stopping Bernanke's QE 2 Toxic Sludge

The world does not like the Ben Bernanke, Federal Reserve Quantitative Easing scheme. It's like a toxic sludge of greenbacks that will leak out out of the US economy spreading inflation around the world. People here in the US and abroad are taking steps to stop the Fed from doing more damage.

Senate's Corker Favors Ending Fed `Dual Mandate' to Focus on Stable Prices -- A Republican member of the Senate Banking Committee called for the Federal Reserve to focus solely on price stability rather than its “dual mandate” to fight inflation and maintain full employment.

Tennessee Senator Bob Corker released his statement a day after House Republican Mike Pence introduced legislation to restrict the Fed’s activities to inflation fighting.

The central bank has embarked on a program of purchasing $600 billion in Treasuries to inject more money into the economy and promote job growth.

“It is time that we work to clarify the mandate of the Federal Reserve,” Corker said in a statement issued a day after he met with Fed Chairman Ben Bernanke. “Providing our central bank with a clear and explicit focus on keeping inflation low will serve America better than the broader mandate approach we have today.”

Corker’s statement said he questioned Bernanke “on recent actions by the Fed.”...

Corker says the Fed's dual mandate makes it "bipolar". That is exactly what Ben Bernanke is suffering from: bipolar disorder.  One symptom of a manic episode per Wikipedia:
sufferers may go on spending sprees...

Bob Corker Joins Chorus Seeking End To Fed's Mandate Seeking Maximum Employment -- Bob Corker has just come out with a statement urging a change to the Fed's mandate, removing the entire "maximum employment" clause. This is possibly the biggest news for the Fed since 1977, and would effectively end the Fed's supreme reign over the US economy, as Bernanke will no longer have the fall back of keeping rates at zero just to get unemployment back to some imaginary number...
David Goldman / Inner Workings:
Deflation As the World Rebuffs the Fed -- 
In forty years of watching financing markets, I have seen nothing like the global jeer at the Fed’s proposed quantitative easing–not, in any case, since the US de-linked the dollar from gold in 1971. Even in 1980, when then Fed chairman Paul Volcker returned from the October IMF meeting in Belgrade and pushed the fed funds rate into double digits, criticism of the Fed were muted, and made behind closed doors. Now the German finance minister is calling the Fed “clueless” in the newspapers and the Asians are threatening exchange controls.

In any number of ways, the market is telling the Obama administration that it can’t keep expanding US debt indefinitely. That was the message from the president’s bi-partisan Deficit Commission last week, which called the debt expansion a “cancer.” That was the message from China’s leading rating agencies, which downgraded US debt to A+. That was the message from Moody’s, which threatened to put Treasuries on negative watch and possibly remove their AAA rating. And that was the message from the G20, which threatened to erect exchange controls to keep unwanted dollars out.

QE2 has turned into Titanic One. The Obama administration and the Fed have run into an iceberg. Quantitative easing did no good for the US economy–which means the rest of the world would obtain no benefit from additional exports to the US–but it played hob with markets around the world.

Governments are out of capacity to spend...
Bernanke's `Cheap Money' Spurs Corporate Investment Outside U.S. -- Southern Copper Corp., a Phoenix- based mining company that boasts some of the industry’s largest copper reserves, plans to invest $800 million this year in projects such as a new smelter and a more efficient natural-gas furnace.

Such spending sounds like just what the Federal Reserve had in mind in 2008 when it cut interest rates to near zero and started buying $1.7 trillion in securities to spur job growth. Yet Southern Copper, which raised $1.5 billion in an April debt offering, will use that money at its mines in Mexico and Peru, not the U.S...

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