View Full Version : Is this the regime's end game?

11-04-2010, 03:32 AM
This may well turn us into the Weimar Republic.

We have reached the point of madness that we are printing money to buy our own debt ... devaluing the dollar and destroying the accumulated wealth of the republic.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The Federal Reserve, in a dramatic effort to rev up a "disappointingly slow" economic recovery, said it will buy $600 billion of U.S. government bonds over the next eight months to drive down interest rates and encourage more borrowing and growth.

Many outside the Fed, and some inside, see the move as a 'Hail Mary' pass by Fed Chairman Ben Bernanke. He embraced highly unconventional policies during the financial crisis to ward off a financial-system collapse. But a year and a half later, he confronts an economy hobbled by high unemployment, a gridlocked political system and the threat of a Japan-like period of deflation, or a debilitating fall in consumer prices. ...

The Fed left open the possibility of doing more if growth and inflation don't perk up in the months ahead. The $75 billion a month in new purchases of Treasury debt come on top of $35 billion a month the Fed is expected to spend to replace mortgage bonds in its portfolio that are being retired. ...

The Federal Reserve Wednesday unveiled a controversial new plan to buy $600 Billion of Treasurys, hoping to spur growth in a disappointingly slow U.S. economy. David Wessel and Neal Lipschutz discuss the likelihood that the plan will work.

There are immense unknowns and many risks.

<span style='font-size: 14pt'>In essence, the Fed now will print money to buy as much as $900 billion in U.S. government bonds through June—an amount roughly equal to the government's total projected borrowing needs over that period.</span>

In normal times, a Fed spending spree on government bonds would be highly inflationary, because it would flood the economy with money and raise worries about too much government spending. The mere worry of too much inflation in financial markets could drive long-term interest rates higher and cause the Fed's program to backfire.

Michael Pence, a top Republican in the House of Representatives, said the Fed was taking an "incalculable risk."

Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, who described the move before the meeting as a "bargain with the devil," was the lone dissenter in a 10-1 vote of the Fed's policy committee. He said the risks of additional government bond purchases outweighed the benefits. ...

This is the Fed's second experiment with a big bond-buying program. Between January 2009 and March of this year, the central bank purchased roughly $1.7 trillion worth of government and mortgage bonds. That move also sparked worries about inflation, which so far hasn't materialized. The bond-buying program is known in some corners as quantitative easing. ...

The Fed will be buying bonds with maturities of as long as 30 years, but will concentrate its purchases in the five-year to six-year range. Some bond-market participants were disappointed with that decision because they wanted the Fed to focus on buying longer-term bonds. But doing so could leave the Fed more exposed to losses if interest rates rise.

There are other risks.

Critics say a weaker dollar isn't in U.S. interests, and that a swift decline in the value of the currency could drive up U.S. interest rates. Fed officials have seen the dollar's drop to date as being orderly and supportive of growth.

Some critics also argue that by purchasing government bonds, the Fed is taking pressure off the White House and Congress to address long-term deficit problems, but Mr. Bernanke is trying to avoid such political calculations.

U.S. trading partners, particularly in the developing world, openly worry that the Fed's money pumping is creating inflation in their own economies and a risk of asset-price bubbles. Fed officials say a strong U.S. economy is in everyone's interest.

In recent weeks, China, India, Australia and others have pushed their own interest rates higher to tamp down inflation forces. Authorities in Brazil and Thailand have imposed taxes on capital flooding into their economies to prevent an asset bubble. And Japanese authorities have intervened in currency markets to prevent the yen from appreciating too much against the dollar.

There is an alternate risk that officials wrestled with in their latest two-day meeting, which concluded before lunch Wednesday: They might not be doing enough.

Economists at the research firm Macroeconomic Advisers LLC calculated that even if the Fed purchases $1.5 trillion worth of Treasury bonds—which some economists say remains a distinct possibility—it would only bring the unemployment rate down by 0.2 percentage points by the end of 2011.

"This instrument doesn't give them a lot of power, especially on the scale which they're prepared to use," said Laurence Meyer, of Macroeconomic Advisers, after the decision.

For the Fed, it was a middle ground that emerged after months of internal debate about the costs and benefits of restarting the program.</div></div>
OH DEAR! (http://online.wsj.com/article/SB10001424052748703506904575592471354774194.html?m od=WSJ_hp_LEADNewsCollection)


11-04-2010, 07:16 AM
They are addicted to spending money, and like any addict, they will commit crimes if necessary to feed their habit.