Michael Snyder
The Economic Collapse
September 13, 2012
You can't accuse Federal Reserve Chairman Ben Bernanke of not living
up to his nickname. Back in 2002, Bernanke delivered a speech entitled
"Deflation: Making Sure 'It' Doesn’t Happen Here" in which he referenced
a statement by economist Milton Friedman about fighting deflation by
dropping money from a helicopter. Well, it might be time for a new
nickname for Bernanke because what he did today was a lot more than drop
money from a helicopter. Today the Federal Reserve announced that QE3
will begin on Friday, but it is going to be much different from QE1 and
QE2. Both of those rounds of quantitative easing were of limited
duration. This time, the quantitative easing is going to be
open-ended. The Fed is going to buy 40 billion dollars worth of
mortgage-backed securities per month until they have decided that the
economy is in good enough shape to stop. For those that get confused by
terms like "quantitative easing" and "mortgage-backed securities", what
the Federal Reserve is essentially saying is this: "We're going to
print a bunch of money and buy stuff for as long as we feel it is
necessary." In addition, the Federal Reserve has promised to keep interest rates
at ultra-low levels all the way through mid-2015. The course that the
Federal Reserve has set us on is utter insanity. Ben Bernanke can rain
money down on us all he wants, but it is not going to do much at all to
help the real economy. However, it will definitely hasten the
destruction of the U.S. dollar.
And the Federal Reserve is apparently very eager to get QE3 going.
Purchases of mortgage-backed securities are going to start on Friday.
In the coming months, hundreds of billions of dollars that the
Federal Reserve has zapped into existence out of nothing will be
injected into our financial system.
So what will happen to all of this new money?
If banks and financial institutions use that money to make loans then it could have somewhat of a positive impact on the economy in the short-term.
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