November 1, 2014 by JImbo
For those who don’t know, QE3 means “Quantitative Easing Program #3”
Essentially it means the government is “printing” lots of money to pump into the economy. There’s more to it than that, but that’s close enough. You get the same end result as if you had just printed dollar bills.
As I’ve mentioned before, inflation hasn’t been 1% or 2% as the government tells you. It’s really been closer to 9-10%. You and I know that from the price of groceries, rent and gas going up and up every year.
The government “experts” think that if they wish hard enough and deny reality that they can prevent it from happening. It’s a simple matter of Mind over Matter. If the voters don’t mind, then it doesn’t matter.
So, the whole thing becomes like the movie “Fight Club.” The first rule is “Don’t talk about Fight Club.” In this case, the same thing is true of QE3 and the Federal Reserve.
So if it’s working so well under the table and out of sight, why the news this week that the Feds are going to END QE3?
To put it simply?
It hasn’t worked. The economy is like a car with a flat tire. You CAN keep driving it, but it’s not good for the car. No matter how well you ignore the sounds and horrible steering, eventually people will notice when you start riding on the rim and it damages the bearings.
Instead of correcting what was wrong in 2008, the government doubled down. They SPED UP. They figured that driving fast enough would keep the tire off the ground and it would miraculously re-inflate on its own.
The problem in 2008 was too many bad loans out there and too much wasteful spending. The solution was… more bad loans and more spending! Pedal to the metal baby!
We’re getting to the point that the damage may become irreversible in the short term. If you do too much damage to the rim, you can’t just replace the tire. You’ll have to replace the whole assembly.
Things get ugly if you artificially prop up the economy for too long.
I disagree with the whole idea of the Federal Reserve. I’ll freely admit that. It’s a bunch of private bankers who pretend to be the Treasury Dept, and as such are NOT accountable to the people.
That’s simply wrong.
Now it’s not just morally wrong. It’s DESTRUCTIVE. We could seriously wreck our economy unless we slow the car down and pull it over.
Check out the Fed’s balance sheet.
That’s some serious liabilities. Is there a reason that the Federal Reserve has to be 4.5 TRILLION dollars in size? Our entire GDP in a year is only about 18 trillion. The Federal Reserve is ONE QUARTER of our economy. That bump of 4 trillion dollars is the money they pumped into the economy disguised as “securities” and “bonds.”
Those are basically just false signs put up. They pretended to buy them in order to hand out money for imaginary loans and bonds. In essence, they really just handed money out freely. Money we didn’t have.
We need to end QE3. Runaway inflation and artificially low borrowing rates don’t allow the economy to heal on its own. They temporarily boost business by creating false conditions, but the consumer is screwed. The worker is screwed.
Savings are destroyed because the retirement people have in the bank is worth less and less every year as time goes on.
In addition, your paycheck hasn’t matched inflation. So, every year YOU make less as the stock market goes up. And remember, the value in the stock market is based on the dollar so that’s “inflated” too.
Long story short, the more money you put into the economy the less each dollar is worth. However, the value of STUFF in the country hasn’t been going up.
In the 1980s, a Big Mac cost about $2.
Today they’re about $4.
The Big Mac is basically the same value. Same calories. Your hunger is the same.
The only difference is that it cost twice as much.
If you make twice as much as 30 years ago, then it’s a wash.
In the mid-1980s the average person made $17,000 a year. That’s $8.50 an hour. So, it took a 15 minutes to earn enough money for a Big Mac.
Today it’s about $44,000 a year. That’s $22 an hour. So, it takes about 11 minutes to earn enough money for a Big Mac.
While the price of the Big Mac may be higher in dollars, it’s value is the same. In fact its TRUE COST as a percentage of your paycheck has gone down.
For folks on a fixed income, the opposite is true. They can’t really make more money. They get what they get.
In fact, since it’s based on the government inflation rates (falsely low) they don’t get very much in cost of living adjustments (COLA.) So, the elderly and retired fall further and further behind every year because the government won’t admit that inflation is higher than it is.
If inflation is 10% every year for food, but you only get 1% more money, you’re falling behind 9% a year.
Clearly we need to end the QE3 and this runaway inflation. My question is… why now? The Fed and this Administration are not known to listen to traditional economists. They tend to march to their own drummer and ignore reality.
Maybe they just believe their hype? They have been SAYING that things are wonderful for a few years now. Maybe they actually believe it? Maybe they sincerely think that the economy is just chugging along fine.
Maybe they’ve driven with the flat tire for so long they just got used to the loud noise? Or maybe they just have the radio turned up to compensate. Or maybe they just want to pull over for a pee break at the rest stop.
At this point it doesn’t really matter. As long as the Feds end QE3 and Democrats lose control of the US Senate, we may be able to fix the tire. If not, it’s not a matter of IF the car is gonna crash. It’s a matter of WHEN.
They’ve said they would cut QE3 before. Then the stock market went crazy, thinking their government subsidized gravy train would end. So, the Feds backed off.
Let’s see if they go through with it this time.