The Runaway Money Printing Policy of the Fed(eral Reserve Bank)

Fresh on the Heels of the Government Shutdown and the painful Necessity to raise the Debt Ceiling a surprising but not unexpected Announcement from the Fed, in the waning Days of the Chairmanship of Mr. Bernanke:

http://www.nbcnews.com/business/fed-says-it-will-keep-stimulating-economy-leaves-rates-unchanged-8C11498307

Basically, the Fed, under Mr. Bernanke's Policy of so called „Quantitative Easing” just announced that will be pouring another $ 85 Billion into the Stock Market, buying Bonds, each Month, for the foreseeable Future, until at least March ofr 2014.  This is Money which is not reflected in the Federal Deficit and Money which the Government neither has, nor has authorized through Congress.  The Report further states and we are quoting here,

Wall Street had expected the Fed to refrain from tapering its so-called Money Printing Operation. (Emphasis added).

According, to The New York Times,on the other Hand,

The statement contained no surprises, and the stock market barely budged. The Fed was widely expected to continue adding $85 billion a month to its portfolio of Treasury securities and mortgage-backed securities, particularly in the aftermath of the disruptive partial shutdown of the federal government in the first half of October.

The Fed maintained a relatively optimistic economic outlook in the statement, released after a scheduled two-day meeting of its policy-making committee. It said the economy continued to expand “at a moderate pace” and that the availability of jobs continued to improve.

Now, as Mr. Bernanke prepares to clean up his Desk and leave his Office at the Federal Reserve, the several Trillion Dollars that he has spent, under this ill advised Policy will, of course, remain on the Books backed by Bonds.  What Kind of Bonds?  Goodness only knows.  It will be Mrs. Yellen's Job, presumably, to find out.

This stubborn Policy, pursued by Mr. Bernanke, to „Lift the Economy by the Bootstraps” under some strange Trickle Down Theory strongly reminsicent of „Reaganomics” has been conducted by Mr. Bernanke, if not singlehandedly, because he has had the Concurrence (although not unanimous) of the Federal Reserve Board Members, certainly without the Approval, Appropriation or even Advice of Congress nor that of the President of the United States.

It is true, that the Federal Reserve Board is supposed to function independently.  One wonders aloud, however, if under „independently” the Framers of the Law setting up the Federal Reserve Bank had in mind it spending $ 85 Billion per Month without any Accountability whatsoever.  No such Thing has ever been done by anyone else, anywhere, ever, with the one notable Exception of Vice President Cheney, who spent Billions on the War in Iraq, also without Congressional Approval.

It must be said, in Defense of Mr. Cheney, that the Sums of Money he spent pale in Comparison to the Amounts being spent by Mr. Bernanke.

This is also coming at a Time where incalculable Effort has been spent on showing that there has not been and there is going to be Little if any Inflation in the Consumer Price Index.

It would take too long to fully examine what that Statement is supposed to mean.  However, in Shorthand, it can safely be said that „No Inflation” means „No Inflation” except that certain Things are not to be included in the Equation, to mention a Few, Energy (Fuel and Utilities), Housing, Commodities (Food) plus a Couple of other Things here and there...

Even that Theory, as flawed as it is, has come under Scrutiny by the Mainstream, although many Economists have questioned ist Wisdom for a long Time.

See...

http://www.nytimes.com/2013/10/27/business/economy/in-fed-and-out-many-now-think-inflation-helps.html?nl=todaysheadlines&emc=edit_th_20131027&_r=0


Janet Yellen, the presumptive incoming Chair(wo)man of the Federal Reserves disagrees with Mr. Bernanke and believes that a draconian Control on Inflation (while notably excluding the Categories noted above and more) is not necessarily a beneficial Policy.

But the Consequences will be for her to sort out, once Mr. Bernanke leaves.

We are not sure where Mr. Bernanke is headed; Rumours have persisted and it appears that it is his wish to return to teaching at Princeton University; we simply don't know.  Earlier, we mentioned, we believe more than once, that President Woodrow Wilson (who was also President of his beloved Princeton University), may have rolled in his Grave (more than once) at the Thought of some of the Things that Mr. Bernanke did; to this, we need to add that he surely would have also scratched his head, if he would have been able to.

Punting

The Annual Deficit for the Budget Year about to close will again exceed $ 1 Billion.  While this should not come as a Surprise, it should nonetheless be jolting, especially in View of the Fact that Congress, consisting of a Group of highly paid Individuals, has chosen to be in Session for 4 Days in August, 8 Days in September and (according to the Schedule), 0 Days in October.

http://www.nytimes.com/2012/09/26/us/politics/obama-faces-test-as-deficit-stays-above-1-trillion.html?nl=todaysheadlines&emc=edit_th_20120926&moc.semityn.www

(Click the Link above in ,,The New York Times'' for more Details)


Regardless of who the Victor will be and Mr. Romney's Chances of being the Victor appear to be diminishing, a bit too rapidly, many of them due to his own doing, the Issue has thusly been punted to beyond the Election Day in November  (Comments by Mr. Romney wondering why Airplane Windows cannot be opened can be, at a certain Level, even more damaging than Comments about the ,,47%.'').

What is going to happen after Election Day?  Likely, a Period of bitter and divisive Discord will ensue and, of course, none of it would be helpful or constructive.

However, one Fear worth considering may be, what Mr. Bernanke might do, in View of a deteriorating Situation.

It is not unlikely that Mr. Bernanke  may come up again with some ill conceived Theory about what he wants to do about ,,fixing the Economy.''  It is arguable that if Mr. Bernanke were to be sent back to Princeton he would do less Damage from there but that poses an interesting Question:  had he been alive, would President Woodrow W. Wilson have rehired him?

Ben Bernanke, Chairman of the Federal Reserve

and former Professor of Economics at Princeton University

 

 President Woodrow W. Wilson

                                                                     28th President of the United States

                                                                     President of Princeton University (1902-1910)

 

 

Spending $ 1.250,00 per Month for every Man, Woman and Child living in the United States

The Federal Reserve Bank has just announced that it will be spending upwards of $ 40 Billion per Month on a Going Forward Basis, for an Indefinite Future, purchasing ,,Mortgages'' from ,,Banks and Financial Institutions.''  This, in the Opinion of the Federal Reserve Bank, is going to stimulate the Economic Recovery in the United States because the Economy has been ,,growing'' according to the Chairman of the Federal Reserve, Mr. Ben Bernanke, at an ,,Unsatisfactory Rate.''

http://www.nytimes.com/2012/09/14/business/economy/fed-announces-new-round-of-bond-buying-to-spur-growth.html?_r=1&nl=todaysheadlines&emc=edit_th_20120914

First of all, it should be noted that a reasonable Assumption would be, the Decision, as ratified by the Federal Reserve Bank is the Brainchild of Mr. Bernanke, who was a Professor of Economics at Princeton University specializing in the 1929-1933 Great Depression.  Mr. Bernanke, we have noted elsewhere in this Column, has just returned from a Conference in Jackson Hole, Wyoming, a Place renowned for its Beauty and known to most Americans from Photographs and Motion Pictures.

http://economywatch.nbcnews.com/_news/2012/09/13/13846702-bernanke-aims-at-job-market-in-latest-bid-to-revive-faltering-recovery?lite

The Stock Market reacted jubilantly to the  Fed's Decision by immediately jumping more than 200 Points to an All Time High.  Some Financial Analysts characterized the Decision as a ,,Sugar Pill for the Stock Market.''  Others, characterized the Short Sightedness of Mr. Bernanke's Decision and the Disconnect which appears to exist between his Area of Academic Specialization and the Decisions which he appears to be making.  It should be noted, this Action comes in the Heels of the Fed's Program of ,,Quantitative Easing'' a Term coined by Mr. Bernanke as well.  The Results of the Quantitative Easing Plan have been described by many as highly questionable in Value.

These Actions could remind one of some of the Words used by former Secretary of the Treasury Henry Paulsen, of Goldman Sachs Fame, who alluded, no, not alluded, emphasized that the Fed had at its Disposal ,,Tools'' (words reminscent of some Kind of an Auto Mechanic or Woodworker's Toolbox) in order to handle Financial Situations.

Those of us who are far less well versed than Mr. Bernanke on Economic Policy Matters can likely make a following simple Arithmetic Calculation:  the Money that the Fed would be giving Banks, in exchange for purchasing Mortgages of Questionable Value (most likely, at full Face Value or possibly even at a Premium - Hey!  It's not easy to spend $ 40 Billion per Month when you've got only one Month to do it!), that Money actually amounts to roughly $ 1.250,00 for every Man, Woman and Child living in the United States, rich or poor, young or old, in one Word, everyone.  Unlike Banks, many of these People would spend their Money, creating Jobs, rather than use them for questionable Financial Investments, Executive Compensation or ,,Conferences'' in Exotic Locales, such as Jackson Hole, Wyoming.

Of course, everyone would have to sign a Promissory Note (at near Zero Interest Rates, as the Banks would be doing) to pay the Money Back and those who can, will, just as the Banks would; those who cannot, will not, just as the Banks would not.

http://www.welt.de/finanzen/article109233809/Boersianer-surfen-auf-Monster-Geldwelle.html

Interestingly, both Presidential Candidates did not express any Concerns or Opposition to Mr. Bernanke's Decision; true, Mr. Bernanke can act independently, without Accountability to the President; however, in the Absence of the Expression of an Opinion by the President or his Opponent, Mr. Bernanke may well take such Silence as a taciturn implicit ,,Carte Blanche'' that his Decision is an appropriate one.  We are wondering if Mr. Bernanke made the Calculation, or Analysis, whether seeking an alternative Method of spending $ 40 Billion Monthly (assuming that such Money should be spent), would not do more to ,,Stimulate the Economy and create Jobs'' rather than a Plan to purchase Mortgages, including potentially worthless Mortgages, from Banks. 

A Letter to the Democratic Party Regional Director

Portions of the Letter and several Names have been edited.

...

Now there are many People who are far smarter than I am and I have no Idea how Things have been worked out or are going to be worked out on this Budget Thing.  All I know, as they used to say, is what I read in the Papers.  And what I read is that there is going to be a super bloody Fight over the next Sixth Months about these Cuts, and then something about a Constitutional Amendment and on and on and on.

We, when I say we, President Obama and all of us who voted for him inherited Two Wars from President Bush and they were both funded outside of the Budget by Mr. Cheney and, I suppose, Mr. Bush must have signed off on it.  But these Expenditures are being continued and they are huge and I do not sense any Urgency about the Money being spent, or as one might put it, wasted, on this.  I doubt that The Department of Defense can afford to get three competitive Bids every time they have to airfreight Drinking Water to Afghanistan.  Yet, that Money is coming out of somewhere and somebody is getting rich, very rich out of it.  That is just an Example.  And that is a Lot of Money.

Someone just acquiesced when Mr. Bernanke spent, I am not sure how much, they say, $ 6 or 7 Hundred Billion; that sounds like a Lot of Money to me, on ‘Quantitative Easing’ and for the World of me, I never heard that Phrase when I went to College nor ever since.  I just wonder whether President Wilson is rolling in his Grave when he hears Mr. Bernanke talk like that, wondering what has become of his beloved Princeton University.

Equally, a Lot of People are concerned about the Things that Mr. Geithner is doing in Office, including the Fact that he is spending more Time, the Way one hears it, talking to Wall Street People and Bank People each Day, than talking with Government People and, just intuitively, that doesn’t sound right either.

I am sorry that President Obama appears, some say, manœvered by People like this, after all, these People are not Tea Party Republicans, they work for the President and we all pushed for an Agenda when working to elect the President and overcame nearly astronomical Odds in order to prevail.

Moreover, it is disingenuous for both Mr. and Mrs. Clinton to trumpet that they have balanced the Budget when they took all of the Entitlement Funds, that includes Medicare and Social Security and dumped them in the General Fund.  Even my Cat, had I had one, would have known how to balance the Budget that Way.

One should perhaps lament not having President Bush, not George W. Bush, that other President Bush, to come out and say a few Words today, as he did to President Reagan, when he called this Type of Behaviour that President Reagan wanted to institute and instituted ‘Voodoo Economics.’  But President Reagan succesfully managed to kick the Can forward and now we all have to deal with it.

To this, one should reflect, perhaps, that the Republican Party was the Party of Abraham Lincoln, a Man who towers as a Beacon in the Annals of History throughout the World as someone who stood for Justice and Equality and paid with his Life for it, yes, Abraham Lincoln and not Ronald Reagan, as some of our Republican Friends would have us believe today and that the Democratic Party, the oldest Political Party in America and one of the oldest Political Parties in the World is the Party of Thomas Jefferson, who found his Inspiration in the Jewish Philosopher Baruch Spinoza and his Writings about Ethics, yes, Thomas Jefferson and not Bill Clinton.