Even Bernanke Knows He Can’t Solve This Problem

To no one’s surprise the Fed announced QE3 on Thursday. It is undefined in terms of its duration. It may go on until inflation destroys the economy. Ben Bernanke has provided a commitment to provide $40 billion per month for as long as it takes. The latter part of his commitment (“for as long as it takes”) is likely to outlive the $40 billion, which almost assuredly will be raised in the future. Sadly, no amount will be sufficient to re-invigorate the economy. Larger amounts will be needed to keep the federal government liquid.

The American Dream has collected ten quotes in response to the latest Fed action:

#1Ron Paul

“It means we are weakening the dollar. We are trying to liquidate our debt through inflation. The consequence of what the Fed is doing is a lot more than just CPI. It has to do with malinvestment and people doing the wrong things at the wrong time. Believe me, there is plenty of that. The one thing that Bernanke has not achieved and it frustrates him, I can tell—is he gets no economic growth. He doesn’t do anything with the unemployment numbers. I think the country should have panicked over what the Fed is saying that we have lost control and the only thing we have left is massively creating new money out of thin air, which has not worked before, and is not going to work this time.”

#2Peter Schiff, CEO Of Euro Pacific Capital

“This is a disastrous monetary policy; it’s kamikaze monetary policy”

#3Michael Pento, The Founder Of Pento Portfolio Strategies

“This is the nuclear option for them. This is a never-ending weapon that is being fired at the middle class”

#4Donald Trump

“People like me will benefit from this.”

#5Economist Anthony Randazzo

“Quantitative easing—a fancy term for the Federal Reserve buying securities from predefined financial institutions, such as their investments in federal debt or mortgages—is fundamentally a regressive redistribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy. It is a primary driver of income inequality formed by crony capitalism. And it is hurting prospects for economic growth down the road by promoting malinvestments in the economy.”

#6John Williams Of Shadowstats.com

“That’s absolutely nonsense. The Fed is just propping up the banks.”

#7Marc Faber

“I happen to believe that eventually we will have a systemic crisis and everything will collapse. But the question is really between here and then. Will everything collapse with Dow Jones 20,000 or 50,000 or 10 million? Mr. Bernanke is a money printer and, believe me, if Mr. Romney wins the election the next Fed chairman will also be a money printer. And so it will go on. The Europeans will print money. The Chinese will print money. Everybody will print money and the purchasing power of paper money will go down.”

#8Mesirow Financial Chief Economist Diane Swonk

“I think this will end up being a trillion-dollar commitment by the Fed”

#9Federal Reserve Chairman Ben Bernanke

“I want to be clear — While I think we can make a meaningful and significant contribution to reducing this problem, we can’t solve it. We don’t have tools that are strong enough to solve the unemployment problem”

#10Credit Rating Agency Egan-Jones

“[T]he FED’s QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the US economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the US, but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power. Hence, in our opinion QE3 will be detrimental to credit quality for the US….”

No one, including Ben Bernanke, truly believes that this latest policy action will revive an economy plagued by unsustainable debt levels, the mis-allocation of resources, mis-pricing and governmental disincentives. The best that can be said about such an action is that it might defer an economic collapse while ensuring a more painful outcome when it inevitably occurs.

http://www.munknee.com/2012/09/even-bernanke-knows-he-cant-solve-this-problem/