What’s Really Behind QE2?

The deficit hawks are circling, hovering over QE2, calling it just another inflationary bank bailout.  But unlike QE1, QE2 is not about saving the banks.  It’s about funding the federal deficit without increasing the interest tab, something that may be necessary in this gridlocked political climate just to keep the government functioning.

On November 15, the Wall Street Journal published an open letter to Fed Chairman, Ben Bernanke, from 23 noted economists, professors and fund managers, urging him to abandon his new “quantitative easing” policy called QE2.  The letter said:

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued…. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

The Pragmatic Capitalist (Cullen Roche) remarked:

Many of the people on this list have been warning about bond vigilantes while also comparing the USA to Greece for several years now.  Of course, they’ve been terribly wrong and it is entirely due to the fact that they do not understand how the US monetary system works…. What’s unfortunate is that these are many of our best minds.  These are the people driving the economic bus.

The deficit hawks say QE is massively inflationary; that it is responsible for soaring commodity prices here and abroad; that QE2 won’t work any better than an earlier scheme called QE1, which was less about stimulating the economy than about saving the banks; and that QE has caused the devaluation of the dollar, which is hurting foreign currencies and driving up prices abroad.

None of these contentions is true, as will be shown.  They arise from a failure either to understand modern monetary mechanics (see links at The Pragmatic Capitalist and here) or to understand QE2, which is a different animal from QE1.  QE2 is not about saving the banks, or devaluing the dollar, or saving the housing market.  It is about saving the government from having to raise taxes or cut programs, and saving Americans from the austerity measures crippling the Irish and the Greeks; and for that, it may well be the most effective tool currently available.  QE2 promotes employment by keeping the government in business.  The government can then work on adding jobs.

The Looming Threat of a Crippling Debt Service

The federal debt has increased by more than 50% since 2006, due to a collapsed economy and the highly controversial decision to bail out the banks.  By the end of 2009, the debt was up to $12.3 trillion; but the interest paid on it ($383 billion) was actually less than in 2006 ($406 billion), because interest rates had been pushed to extremely low levels.  Interest now eats up nearly half the government’s income tax receipts, which are estimated at $899 billion for FY 2010.  Of this, $414 billion will go to interest on the federal debt.  If interest rates were to rise just a couple of percentage points, servicing the federal debt would consume over 100% of current income tax receipts, and taxes might have to be doubled.

As for the surging commodity and currency prices abroad, they are not the result of QE.  They are largely the result of the U.S. dollar carry trade, which is the result of pressure to keep interest rates artificially low.  Banks that can borrow at the very low fed funds rate (now 0.2%) can turn around and speculate abroad, reaping much higher returns.

Interest rates cannot be raised again to reasonable levels until the cost of servicing the federal debt is reduced; and today that can be done most expeditiously through QE2 — “monetizing” the debt through the Federal Reserve, essentially interest-free.  Alone among the government’s creditors, the Fed rebates the interest to the government after deducting its costs.  In 2008, the Fed reported that it rebated 85% of its profits to the government.  The interest rate on the 10-year government bonds the Fed is planning to buy is now 2.66%.  Fifteen percent of 2.66% is the equivalent of a 0.4% interest rate, the best deal in town on long-term bonds.

A Reluctant Fed Steps Up to the Plate

The Fed was strong-armed into rebating its profits to the government in the 1960s, when Wright Patman, Chairman of the House Banking and Currency Committee, pushed to have the Fed nationalized. According to Congressman, Jerry Voorhis, in The Strange Case of Richard Milhous Nixon (1973):

As a direct result of logical and relentless agitation by members of Congress, led by Congressman Wright Patman as well as by other competent monetary experts, the Federal Reserve began to pay to the U.S. Treasury a considerable part of its earnings from interest on government securities. This was done without public notice and few people, even today, know that it is being done.  It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation’s money, but on the other hand charging the nation interest on its own credit – which no true national bank of issue could conceivably, or with any show of justice, dare to do.

Voorhis went on, “But this is only part of the story.  And the less discouraging part, at that.  For where the commercial banks are concerned, there is no such repayment of the people’s money.”  Commercial banks do not rebate the interest, said Voorhis, although they also “‘buy’ the bonds with newly created demand deposit entries on their books – nothing more.”

After the 1960s, the policy was to fund government bonds through commercial banks (which could collect interest) rather than through the central bank (which could not).  This was true not just in the U.S. but in other countries, after a quadrupling of oil prices combined with abandonment of the gold standard produced “stagflation” that was erroneously blamed on governments “printing money.”

Consistent with that longstanding policy, Chairman Bernanke initially resisted funding the federal deficit.  In January 2010, he admonished Congress:

We’re not going to monetize the debt.  It is very, very important for Congress and administration to come to some kind of program, some kind of plan that will credibly show how the United States government is going to bring itself back to a sustainable position.

His concern, according to the Washington Times, was that “the impasse in Congress over tough spending cuts and tax increases needed to bring down deficits will eventually force the Fed to accommodate deficits by printing money and buying Treasury bonds.”

That impasse crystallized on November 3, 2010, when Republicans swept the House.  There would be no raising of taxes on the rich, and the gridlock in Congress meant there would be no budget cuts either.  Compounding the problem was that over the last six months, China has stopped buying U.S. debt, reducing inflows by about $50 billion per month.

QE2 Is Not QE1

In QE1, the Fed bought $1.2 trillion in toxic mortgage-backed securities off the books of the banks.  QE1 mirrored TARP, the government’s Troubled Asset Relief Program, except that TARP was funded by the government with $700 billion in taxpayer money.  QE1 was funded by the Federal Reserve with computer keystrokes, simply by crediting the banks’ reserve accounts at the Fed.

Pundits were predicting that QE2 would be more of the same, but it turned out to be something quite different.  Immediately after the election, Bernanke announced that the Fed would be using its power to purchase assets to buy federal securities on the secondary market — from banks, bond investors and hedge funds.  (In the EU, the European Central Bank began a similar policy when it bought Greek bonds on the secondary market.)  The bond dealers would then be likely to use the money to buy more Treasuries, increasing overall Treasury sales.

The bankers who applauded QE1 were generally critical of QE2, probably because they would get nothing out of it.  They would have to give up their interest-bearing bonds for additional cash reserves, something they already have more of than they can use.  Unlike QE1, QE2 was designed, not to help the banks, but to relieve the pressure on the federal budget.

Bernanke said the Fed would buy $600 billion in long-term government bonds at the rate of $75 billion per month, filling the hole left by China.  An estimated $275 billion would also be rolled over into Treasuries from the mortgage-backed securities the Fed bought during QE1, which are now reaching maturity.  More QE was possible, he said, if unemployment stayed high and inflation stayed low (measured by the core Consumer Price Index).

Addison Wiggin noted in his November 4 Five Minute Forecast that this essentially meant the Fed planned to monetize the whole deficit for the next eight months.  He quoted Agora Financial’s Bill Bonner:

If this were Greece or Ireland, the government would be forced to cut back. With quantitative easing ready, there is no need to face the music.

That was meant as a criticism, but you could also see it as a very good deal.  Why pay interest to foreign central banks when you can get the money nearly interest-free from your own central bank?  In eight months, the Fed will own more Treasuries than China and Japan combined, making it the largest holder of government securities outside the government itself.

The Overrated Hazard of Inflation

The objection of the deficit hawks, of course, is that this will be massively inflationary, diluting the value of the dollar; but a close look at the data indicates that these fears are unfounded.

Adding money to the money supply is obviously not hazardous when the money supply is shrinking, and it is shrinking now.  Financial commentator, Charles Hugh Smith, estimates that the economy faces $15 trillion in writedowns in collateral and credit, based on projections from the latest Fed Flow of Funds.  The Fed’s $2 trillion in new credit/liquidity is therefore insufficient to trigger either inflation or another speculative bubble.

In any case, Chairman Bernanke maintains that QE involves no printing of new money.  It is just an asset swap on the balance sheets of the bondholders.  The bondholders are no richer than before and have no more money to spend than before.

Professor Warren Mosler explains that the bondholders hold the bonds in accounts at the Fed.  He says, “U.S. Treasury securities are accounted much like savings accounts at a normal commercial bank.”  They pay interest and are considered part of the federal debt.  When the debt is “paid” by repurchasing the bonds, all that happens is that the sums are moved from the bondholder’s savings account into its checking account at the Fed, where the entries are no longer considered part of the national debt.  The chief difference is that one account bears interest and the other doesn’t.

What About the Inflation in Commodities?

Despite surging commodity prices, the overall inflation rate remains very low, because housing has to be factored in.  The housing market is recovering in some areas, but housing prices overall have dropped 28% from their peak.  Main Street hasn’t been flooded with money; the money has just shifted around.  Businesses are still having trouble getting reasonable loans, and so are prospective homeowners.

As for the obvious price inflation in commodities — notably gold, silver, oil and food — what is driving these prices up cannot be an inflated U.S. money supply, since the money supply is actually shrinking.  Rather, it is a combination of factors including (a) heavy competition for these scarce goods from developing countries, whose economies are growing much faster than ours; (b) the flight of “hot money” from the real estate market, which has nowhere else to go; (c) in the case of soaring food prices, disastrous weather patterns; and (d) speculation, which is fanning the flames.

Feeding it all are the extremely low interest rates maintained by the Fed, allowing banks and their investor clients to borrow very cheaply and invest where they can get a much better return than on risky domestic loans.  This carry trade will continue until something is done about the interest tab on the federal debt.

The ideal alternative would be for a transparent and accountable government to issue the money it needs outright, a function the Constitution reserves to Congress; but an interest-free loan from the Federal Reserve rolled over indefinitely is the next best thing.

A Bold Precedent

QE2 is not a “helicopter drop” of money on the banks or on Main Street.  It is the Fed funding the government virtually interest-free, allowing the government to do what it needs to do without driving up the interest bill on the federal debt – an interest bill that need not have existed in the first place.  As Thomas Edison said, “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also.”

The Fed failed to revive the economy with QE1, but it could redeem itself with QE2, a bold precedent that might inspire other countries to break the chains of debt peonage in the same way.  QE2 is the functional equivalent of what many countries did very successfully before the 1970s, when they funded their governments with interest-free loans from their own central banks.

Countries everywhere are now suffering from debt deflation.  They could all use a good dose of their own interest-free national credit, beginning with Ireland and Greece.

Ellen Brown is an attorney in Los Angeles and the author of 11 books. In Web of Debt: The Shocking Truth about Our Money System and How We Can Break Free, she shows how a private banking cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Read other articles by Ellen, or visit Ellen's website.

17 comments on this article so far ...

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  1. Don Hawkins said on November 20th, 2010 at 7:38am #

    the government to do what it needs to do. Humm so far it appears not so much need but want to say the least.

  2. Don Hawkins said on November 20th, 2010 at 7:40am #

    Sorry instead of government should have put State want’s to do.

  3. Don Hawkins said on November 20th, 2010 at 8:01am #

    Let’s see the next move from the State will be well look no further than Fox New’s. That little group is just pissed off as they want to run the Fascist State sort of masquerading as another form of government and yes Beck get’s to be the State preacher man. Fear not we are calling in the red Cross and you will get low cost loans and remember respect the State and vote and listen to as many messages as possible do it for your country.

  4. MichaelKenny said on November 20th, 2010 at 8:54am #

    What Ireland and Greece should do is a matter for the Irish and the Greeks respectively, not for Ms Brown, or any other foreigner, for that matter. What I find most encouraging is the increasingly hysterical attempts by the defenders of the American Empire to smear my country and other European countries. Obviously, sneering at us as “pigs” didn’t work! The attack on Ireland is a tacit admission that the attack on Greece has failed. If these people are so frantically attacking the EU, then they must perceive us as a real threat to their power. If the American elite is attacking countries designated as “allies”, then they perceive the Empire as essentially defeated and are lashing out wildly in the hope of finding a miracle. Ireland is a far tougher nut than Greece and attacking Ireland may well be rock on which the Wall St banksters perish.

  5. mary said on November 20th, 2010 at 9:44am #

    Why then are the ConDems cheerleading for the US and the financial sharks? And where is the £7 billion that the UK is apparently contributing to the rescue, coming from?

    Hague ‘doubts’ over future of euro
    20 November

    Foreign Secretary William Hague has raised doubts about the future of the euro

    William Hague has raised doubts about the future of the euro, saying it was impossible to know whether the currency would collapse.

    The Foreign Secretary, a vociferous and long-standing critic of European monetary union, said he “hoped” that the euro would survive, but added: “Who knows?”

    His comments came as talks continued about the possible need to bail out debt-ridden Ireland, the latest crisis-hit eurozone member.

    Asked whether the euro could collapse, Mr Hague told BBC Radio 4’s Today programme: “Well I hope not.

    “No-one has pointed out more of the problems than I have over the years in having a currency where we lock together the exchange rates and interest rates of countries with different economies.

    “But I very much hope not. Who knows?

    “If an economist knew that, let alone a politician, they would be very gifted people, but clearly we want to make sure there is stability in the eurozone and irrespective of the eurozone there is a specific case for assisting Ireland if Ireland asks for that assistance.”

    The Government has repeatedly stressed that Dublin has not requested financial help, despite pressure from within the European Union for it to accept a package to calm jittery markets.

    Officials from both the European Commission and the International Monetary Fund were in the Irish capital today to discuss the options for ensuring Ireland can cope with its struggling banks.

    (news.aol.co.uk/politics-news/story/hague-doubts-over-future-of-euro/1412330)

  6. mary said on November 20th, 2010 at 10:00am #

    You should listen to this report by Gavin Hewitt on From Our Own Correspondent. It is very moving. The Irish mothers and fathers fear that their children will leave their country as happened before during the Famine in the C19. Emigration fairs are being held.

    1min 30secs in.
    http://www.bbc.co.uk/iplayer/episode/b00w019v/From_Our_Own_Correspondent_20_11_2010/

    The Dublin taxi driver told him that he hated ‘those who had broken his country’.

  7. Ellen Hodgson Brown said on November 20th, 2010 at 10:56am #

    Michael Kenney, I didn’t mean to offend the Irish! In fact I love the Irish! In fact I am Irish! Partly. I was just saying the Irish could stand up to the debt mongers in the same way, by issuing their own national credit. It’s not exactly a new idea; the Canadians, New Zealanders, Australians, etc. did it up till the 1970s, very successfully. Maybe the Irish too, I just haven’t followed that part of monetary history.

  8. bozh said on November 20th, 2010 at 11:39am #

    if better usage of money wld end occupations of palestina, et al, end homelessness, wifebeating, make people snitch to police, end cia terror, educate all those that want to be educated, end ownership of imformation by privateers, end robbery by banksters, end or reduce waste-pollution, end lying-deceiving by much of the people; do away with all cults, future wars, wmd; provide work-healthcare for everybody, etcetc., then i am for it.

    alas, the latest changes in money or hammer usage [the nail gets in regardless], wld do just fine for the supremacists and worsening for housepeople, soldiers, hobos, and the like.

    want to bet? about this scenario coming true?
    as they say: the more supremacists change things, the worse it gets! oops, for some people! tnx

  9. mary said on November 21st, 2010 at 12:13pm #

    The Irish government have now rolled over to the IMF/ECB to the tune of £120 billion, £6 billion of which is coming from busted Britain according to the BBC! This is the comment from the Morning Star. The amounts of funny money as I call it are mind boggling. Nothing funny though for the poor ordinary people in Ireland and here in the UK where we face a chill winter in all respects including heating our homes as gas and electricity prices have jumped up by 9% in the last week.

    Apocalypse now for Ireland?
    Sunday 21 November 2010

    Three horsemen of the apocalypse flew into Dublin at the end of last week to deliver a message not only to the Irish government but to the peoples of Europe. It was not quite war, conquest, famine and death on a Biblical scale, but it was certainly the modern-day equivalent – class war, neocolonial domination, poverty and mass unemployment.

    Emissaries from the European Commission, the European Central Bank and the International Monetary Fund had arrived to enforce the interests of finance monopoly capital. Despite its protestations, the Irish government will have a financial “stability” package forced upon it.

    The wishes and sensibilities of that country’s electors and those they elect count for nothing in this era of neoliberal imperialism. Instead, those non-Irish banks foolish and greedy enough to have a financial flutter on the Irish property market via the banking system in Dublin must get their gambling chips back in cash.

    This was the motive behind the offer of the fourth horseman, British Chancellor Osborne, to lend the Irish government untold billions on the eve of crisis talks in Dublin. He dressed it up as a gesture of friendship between “good neighbours,” but in reality it was an act of solidarity with British banks who are owed a total of £140 billion by their bankrupt counterparts over the water.

    Indeed, according to the Bank of International Settlements, the exposure of British banks to Ireland is the highest in the world – higher even than that of Germany and France. So the Con-Dem government in London, already engaged in slashing welfare benefits here by £83bn, was willing to stump up a massive loan to the Irish banks – so that they could hand it over to the Royal Bank of Scotland, Lloyds, Barclays and the rest.

    This is in addition to the £1,300bn given or pledged by the last new Labour government to rescue City financial markets and institutions, and which included more than £18bn passed to the Irish arms of the RBS and Lloyds. Now instead, negotiations are under way in Dublin to finalise the terms of the EU-IMF offer that Prime Minister Brian Cowen and Finance Minister Brian Lenihan cannot refuse.

    On behalf of German state-monopoly capitalism, Chancellor Angela Merkel wants to raise Ireland’s low rate of corporation tax on business profits, putting an end to the latter’s competitive advantage. The British government may be more circumspect. Like its predecessors, it puts the interests of tax-dodging British monopolies before those of the public revenue, public services and ordinary taxpayers.

    Instead of clamping down on wealthy “non-doms” and tax havens under British jurisdiction, the Con-Dem government prefers to cut corporation tax still further, while soft-pedalling on the much-vaunted bank levy.

    Perhaps Osborne’s offer was intended to scupper the EU-IMF initiative, providing an alternative source of funding in order to maintain a Dublin tax haven used increasingly by British business corporations.

    Whether an EU-IMF “stability” package will produce the desired result is doubtful. It would merely prop up a system of state-monopoly capitalism in Ireland which is utterly corrupt, politically and financially. Ireland’s modern politicians and bankers have learnt much from their former colonial masters in London.

    Certainly, any new package will include even stricter control of Ireland’s public finances from Brussels and Frankfurt. Deeper public spending cuts and redundancies will plunge the Irish economy back into recession.
    Having rid themselves of the formal trappings of British imperialism, the people of Ireland find themselves well and truly under the heel of EU bankers and bureaucrats.

    The Communist Party of Ireland pointed out the alternative in Saturday’s Morning Star. It calls for repudiation of the debt run up by bankers to other bankers, and for the repatriation of fiscal powers from the EU to the Irish Republic.

    The horsemen of the apocalypse should be put in the next horse-box out of the Irish capital.

    (www.morningstaronline.co.uk/index.php/news/content/view/full/97879 )

  10. Don Hawkins said on November 21st, 2010 at 2:11pm #

    But historic tradition is, so to speak, of yesterday; nowhere have we really overcome what Thorstein Veblen called “the predatory phase” of human development. The observable economic facts belong to that phase and even such laws as we can derive from them are not applicable to other phases. Since the real purpose of socialism is precisely to overcome and advance beyond the predatory phase of human development, economic science in its present state can throw little light on the socialist society of the future. Einstein

    http://www.monthlyreview.org/598einstein.php

    A bully only has as much power as his victim is willing to give him. When a victim stands and fights, the bully will often back down because all bullies are cowards.

  11. Deadbeat said on November 21st, 2010 at 2:49pm #

    It is about saving the government from having to raise taxes or cut programs, and saving Americans from the austerity measures crippling the Irish and the Greeks; and for that, it may well be the most effective tool currently available.

    This is exactly as I described. This is a KEYNESIAN measure to try to mitigate the crisis. Lately Bernake testified that the Congress and the Administration needs to provide more direct stimulus. However this time around Keynesian measures, and here I agree with the “Right”, will only “kick the can down the road”.

    We need to face the fact that Keynesian measures won’t solve the systemic problems of Capitalism. Let’s examine this:

    [1] There are no plans to alleviate or forgive consumer and private debt.

    I find this ironic as during the “Battle of Seattle” the mantra by the pseudo-Left against globalization was “debt forgiveness”

    [2] There are no plans to eliminate the credit rating monopolies. All those people will ruined credit may have problem finding jobs that require “clean” credit.

    [3] Ideological gridlock is preventing the government from being direct employers and the jobs they are creating are “police-state” type jobs like the TSA.

    [4] Keynesianism doesn’t address the exploitative relationship of jobs nor the productivity contradiction. In other words workers are so efficient that there really is no need for “jobs” and more need for leisure.

    [5] Keynesianism doesn’t address ecological concerns and the profit growth imperative.

    There needs to be a whole rethink about the function of money and having an economy built around and anachronistic commodity.

  12. mary said on November 22nd, 2010 at 1:27am #

    This You Tube has had 2.335 million views since 1st November! LOL

    http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded

    Quantative Easing Explained

    PS The Euro is rising in value this morning since the IMF/ECB got Ireland on the rack. Just goes to show that the gangsters are still in charge.

  13. Deadbeat said on November 22nd, 2010 at 7:32am #

    Interestingly Zionism rears its ugly head again …

    After the 1960s, the policy was to fund government bonds through commercial banks (which could collect interest) rather than through the central bank (which could not). This was true not just in the U.S. but in other countries, after a quadrupling of oil prices combined with abandonment of the gold standard produced “stagflation” that was erroneously blamed on governments “printing money.”

    The quadrupling of oil prices in the 1970’s was in retaliation by the Arab states of the U.S. support of Israel.

  14. Ellen Hodgson Brown said on November 22nd, 2010 at 7:56am #

    There is good evidence that it was actually part of a secret deal between Henry Kissinger and OPEC, coming out of a meeting of big bankers held in Sweden in 1973 as I recall. They were trying to figure out how to keep the world in their debt grip after the dollar had gone off the gold standard in 1971. They decided to back the dollar with oil. They told the Arabs, “we are going to make you very rich. We are going to quadruple the price of oil. In return you will sell your oil only in dollars and will deposit your dollars in our Wall Street and London banks, and we will protect you militarily.” It was a deal they couldn’t refuse. Iraq broke the pact in 2000 and it was curtains for Iraq thereafter.

  15. Deadbeat said on November 22nd, 2010 at 8:15am #

    This is a great and extremely informative article by Ms. Brown. Here’s what I didn’t know …

    China has stopped buying U.S. debt, reducing inflows by about $50 billion per month.

    China has probably slowed buying for both political and economic reasons. Due to the recession, there is probably now less dollars needed to recycle by the Chinese back into U.S. Treasuries. And it is healthy for the Chinese need to diversify out of USD as they expand their trading partnerships world-wide.

    However the link to Bernake’s Op Ed is rather enlightening …

    Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run. Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling. In the most extreme case, very low inflation can morph into deflation (falling prices and wages), which can contribute to long periods of economic stagnation.

    Right now we are seeing rising commodity prices and food prices have been INCREASING. However the government altered how they calculate inflation in order to cheat Social Security recipients and others of inflation adjusted (COLA) benefit increases. Inflation has been woefully understated. This is because commodities prices are artificial and like money are DECOUPLED from actual human demand and human need.

    Even absent such risks, low and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating.

    As I’ve been pointing out the FED action was completely Keynesian. Although Keynes actually argued that monetary policy is limited in what it can do the fact that the FED is trying to stabilize the economy by boosting employment is the key aspect of Keynesian economics. However what this illustrates the limit of Keynesian economics. Liberals like Mike Whitney and Robert Pollin are not addressing the DEBT issue of workers and the fundamental contradictions of Capitalism. They’re argument is to use the immediacy of public anxiety to maintain Capitalism. Clearly people need money in order to obtain vital goods and services but their solution to getting money into people hands is EXPLOITATION (“jobs, jobs, jobs”).

    But “jobs” does not address DEBT and its ramifications. In fact they argue for MORE debt which is a TRANSFER of wealth to the already rich while workers have to obtain money by being further exploited. As the Right-wing IRONICALLY says it will only “kick the can down the road.”. Liberalism prolonged the contradictions of Capitalism for 70 years and now they are running out of options with the most likely option now being AUSTERITY upon a society that has been accustomed to rising living standards. It doesn’t look good.

    The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed. With short-term interest rates already about as low as they can go, the FOMC agreed to deliver that support by purchasing additional longer-term securities, as it did in 2008 and 2009. The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August.

    This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

    Rising stock prices — that’s right — KEYNESIANISM for the rich. Higher stock prices will only result in more income and wealth stratification while workers will still face, with a gridlocked Congress, job loss and foreclosure, depression and anxiety. The “real economy” be damned.

    This is the economy brought to you by the LIBERALS. Understand what Keynesian economics is folks because that is what is now being sold by the Huffington Post, Dennis Kucinich, Robert Reich, Joesph Stilitz, Naomi (“mixed[-up] economy) Klein (the anachronistic Liberals/Progressive/zio-pseudo-Left.)

  16. Deadbeat said on November 22nd, 2010 at 8:29am #

    Ms. Brown writes …

    They decided to back the dollar with oil. They told the Arabs, “we are going to make you very rich

    I’m not going to dispute the meeting. I’m not surprised but if the Arabs were assured of such a deal then the incentive would have been to keep the oil flowing and maintain stable prices. There would have been no reason to upset such a nifty deal especially with the U.S. still fighting in Southeast Asia at the time.

    Unfortunately, the six-day war and U.S. support of Israel clearly upset that situation and the Arabs retaliated by boycotting the U.S. That is what sent oil prices through the roof resulting in a lot of anti-Arab sentiment egged on by the Zionist media in 1973. That anti-Arab sentiment was nurtured by the Zionists and assisted with their rising influence and power in the U.S.

  17. bozh said on November 22nd, 2010 at 9:38am #

    price of gas had in recent yrs doubled. but price of bread had not doubled; perhaps rising by 10 or 20%.
    is the raise in price of oil paying for u.s and nato wars? and the price of oil and gas may double once again to pay for more wars? and, of course, to augment or maintain plutocratic wealth in arab lands and u.s?

    surely, rise of oil prices doesn’t just happen. even cancer doesn’t just happen. but, it seems, people are looking for FIRST CAUSE for cancer, but not FIRST CAUSE, for warfare, rising prices, profits, high salaries, inflation, usury, etc.
    tnx
    and to ensure that we never ever look for FIRST CAUSE for any phenomenon, u.s governance sends out thousands upon thousands of ‘economists’, ‘bankers’, ‘educators'; who eject from their swollen heads and padded wallets thousands of theories about how money or economy functions!

    yet, not theory appears needed. we can see money or hammer with naked eyes and how these tools work; in reality and in principle!
    but selling us snake oil to continue. tnx