Friday, September 14, 2012

QE Infinity: Fed Buying More Toxic Assets From Banks Will NOT Help Main Street

Eric Blair
Activist Post
September 14, 2012

Ben Bernanke and the Federal Reserve announced an open-ended bailout for the banks yesterday by a new mechanism called QE Infinity where they plan to purchase $40 billion of toxic mortgage-backed securities per month "until further notice".

Shrouded in confusing language like "unlimited stimulus" or "quantitative easing", this unprecedented move and rule change by the Fed was said to be warranted because employment remains weak even though they still maintain the false notion that "economic activity has continued to expand at a moderate pace in recent months."

As stated in the FMOC press release:

If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. 
Of course this move "to foster maximum employment and price stability" does nothing to directly help job creation, and will continue to hurt main street by inflating the price of everything purchased by dollars. Yet it will clearly reward the investor class who already own most of the dollar-based assets.

The theory is that by removing toxic assets from the bank's books they have more liquidity to offer more credit, or to purchase more government debt. Somehow this is supposed to trickle down and help improve unemployment, which real numbers show to be in the 20% range when all factors are considered.

After a combined $2.3 trillion from QE1 ($1.7T) and QE2 ($600B), plus over $16 trillion is secret bailouts to recapitalize banks with absolutely no measurable improvement in the economy, how could any thinking person believe this policy will be beneficial?

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