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.

The Social Security Tax - why it is a Regressive Tax and what Solutions are possible

One of the Tax Increases enacted or, more correctly, reinstated by the ,,Fiscal Cliff’’ Legislation is the additional 2% Social Security Tax.  This Tax was reduced from 6,2% to 4,2% by the Bush Tax Cuts; in one of the more bizarre Offshoots of the ,,Theory of Reaganomics,’’ take in less and pay out more, don't worry, as an old Sales Manager used to say, we'll make it up in Volume.

Of course, it doesn't work that Way but, then again, Economics was not Mr. Bush's Forté.  We don't know what his Forté was, actually, but certainly Economics was not one of them.

As a Result of this Action and previous underlying Actions, the Social Security Fund is facing a Deficit (Loss) of around $ 100 Billion in 2013; nobody knows for sure, really, but this Estimate is as good as any.  Reverting to the 6,2% Rate will alleviate the Problem somewhat but nowhere nearly enough.

Everybody who gets a Wage pays this Tax (matched by an equal Amount in Employer Contributions; the Employer Contributions Rate had not been reduced so it did not have to be revised - interestingly, no ,,Job Creation’’ Argument was made for that by the Bush Administration); however, the more interesting Part is that this Tax applies only to the First $110.000,00 or so of Income that everybody earnes; after that, one is home free; no 6,2% for Employee nor Employer.  This Policy, which interestingly, is not practiced by any other major Country which has a Social Security Type System merely exacerbates one of the most regressive Taxes imaginable.  Doubling the Social Security Tax Ceiling would eliminate 40-50% of the Annual Deficit and eliminating it altogher would allow for financing of Social Security and Medicare without straining any other Part of the Federal Budget.

Raising or eliminating the Ceiling would affect only that Part of Salaries in excess of $ 110.000,00 which would allow the Tax to become less regressive (although it would still be regressive) and bring a slight Modecum of Equity to the Social Security System as well as resolving another Piece of the Federal Budget and Deficit Dilemma.

The one Caveat would be, not to let the Clintons get Wind of this (admittedly, a hard Feat to accomplish) and throw the additional Revenues into the General Fund (as they did before), claim that somehow they ingeniously balanced the Budget and then leave for someone else after them the Task of straightening out the Mess once again.