By Max Rugemer | Saturday, November 6th, 2010 at 6:44 am
The Democrats are trying the Weimar Republic approach of the 1930s to solve their destruction of the US economy. The Federal Reserve announced plans to buy $600 billion in United States treasuries this week. This strategy, under the current buzzwords of quantitative easing, is risky:
…. starting in 2009, the Fed embarked on what it called quantitative easing — a fancy term for creating money out of thin air. Over a little more than a year, it bought more than $1.7 trillion in assets, mainly U.S. Treasury and agency debt.
Today, U.S. bank reserves are close to $1 trillion — an enormous amount compared with the normal $4 billion to $8 billion.
On Tuesday, with the economy struggling and many Fed officials still worried about the specter of deflation, the Fed embarked on a second round of quantitative easing, dubbed QE2. The plan is to spend $600 billion to buy even more government debt….
Another term for the shell game that the Fed is playing with our collective worth is monetizing the debt:
The shell game that the Fed is currently playing does not change the basic equation: Money is being printed out of thin air so that it can be used to buy US government debt.
The idiocy of what the Federal Reserve is doing isn’t receiving enough media coverage. Germans are qualifed better than anyone else to comment because they made this mistake during the Weimar Republic & suffered horribly for it.
Finance Minister Schaeuble sharply criticizes US Federal Reserve move
….The US plan, called quantitative easing, aims to put more money into the pockets of companies, consumers and homeowners but some financial analysts have expressed fears that it could lead to excessive inflation and an intensification of currency imbalances.
Schaeuble said he would not let Germany’s opposition to the Fed’s action get pushed to the back burner and that the issue would be addressed during the G20 summit in South Korea next week.
“I wish the Americans every success in dealing with their big problems effectively and swiftly,” he said. “But if they look at the successes that Germany has had they will see that more and more deficits is not the way to do it.”
Europe’s largest economy, Germany is enjoying a strong recovery from the global economic crisis and has resisted calls for scaling back its austerity measures and lowering taxes….
Wikipedia — Inflation in the Weimar Republic
Reuters — U.S. dollar printing is huge risk:
Unbridled printing of dollars is the biggest risk to the global economy, an adviser to the Chinese central bank said in comments published on Thursday, a day after the Federal Reserve unveiled a new round of monetary easing.
China must set up a firewall via currency policy and capital controls to cushion itself from external shocks, Xia Bin said in a commentary piece in the Financial News, a Chinese-language newspaper managed by the central bank.
“As long as the world exercises no restraint in issuing global currencies such as the dollar — and this is not easy — then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament,” he said….
The Federal Reserve launched a fresh effort on Wednesday to support the struggling U.S. economy, committing to buy $600 billion in government bonds despite concerns the programme could do more harm than good….
Comments: Comments Off|
Send a link: Tell a friend about this.
Link to this post: Permalink
Send us your link: Trackback link
Filed under: Economy|
Tags: Economics, Economy, Federal Reserve, Fiscal policy, monetize debt, monetize the debt, monetizing debt, monetizing the debt, ponzi scheme, QE2, quantitative easing, shell game, Weimar Republic, Xia Bin