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Fed To Review $600B Bond Buying (QE2)

From a surprisingly un-outraged at bailing out the rich Associated Press:

Fed to review $600B bond-buying program at meeting

December 14, 2010

WASHINGTON (AP) — After launching a much-criticized $600 billion bond-buying program last month to bolster the economy, the Federal Reserve is now taking stock of how it’s working.

Notice that the first bond-buying program, Quantitative Easing One (QE1) got no criticism, even though it was even larger. Mainly because we never heard one word about it from our watchdog media.

Fed Chairman Ben Bernanke and his colleagues gathered Tuesday morning for their last scheduled meeting of 2010, and no policy changes are expected.

Hey, when you are on a roll, why change?

Instead, Fed policymakers will examine the effectiveness of the unfolding program and discuss the implications of a tax-cut plan emerging from Congress.

Since the Fed announced its second round of stimulus [sic] on Nov. 3, stocks have risen. That’s encouraging for the economy because larger stock portfolios make people, especially the wealthy, more inclined to spend.

What’s this? How can helping the rich get richer help the economy? – Also, while we are asking questions, how much are these two Quantitative Easings ‘costing’ the government?

On the other hand, rates on mortgages have risen, defying one of the Fed’s stated goals of the bond-buying program. The average rate on a 30-year fixed mortgage has climbed to 4.61 percent. It’s up sharply from 4.17 a month ago, the lowest rate in some 40 years of record keeping.

The Fed’s decision to buy $600 billion worth of government bonds by the end of June is intended to spur Americans to spend more, which would invigorate the economy.

Again, we can still remember way back to the bad old days of the Bush administration, when spending was considered even more evil than not recycling.

Even supporters had cautioned that the benefits of the Fed’s program would be modest. Even after the Fed unveiled it, Bernanke pressed Congress to intervene by providing the economy with stimulus. Bernanke warned that the Fed couldn’t solve the economy’s problems on its own.

Absolutely not. We need years and years of unemployment benefits to really get the economy humming.

Critics, from Republicans in Congress to some officials within the Fed, have also said they fear the Fed’s intervention could spur inflation and speculative buying on Wall Street while doing little to energize the economy

But where are the critics from the left? How is it that the fed can help millionaires and billionaires and they don’t let out one peep in outrage?

Persistently high unemployment was a main factor behind the Fed’s decision to launch the bond-buying program.

Which seems counter-productive, given the purported economic stimulus provided by unemployment benefits. Especially unfunded unemployment benefits. 

The tax cut deal struck between President Barack Obama and Senate Republicans, however, is raising hopes for the economy. Economists say it will boost spending by individuals and businesses. That will strengthen growth and lead companies to hire more

Since there are no real tax cuts we will assume these are the same boneheaded economists who are surprised every week when the ‘unexpected’ unemployment numbers are reported.

When the Fed launched the $600 billion program, it held the door open to buying even more than $600 billion in bonds if the economy were to weaken. Or buying less if the economy grew more strongly than expected.

When the Fed intervenes to buy Treasury bonds, its purchases tend to drive down the bonds’ yields. On the other hand, if it sells bonds or buys fewer, the yields could tick up.

In an interview on CBS’ "60 Minutes," Bernanke said the Fed would regularly review the bond-purchase program. "This is not something that we’ve set into automatic motion going forward," he said.

Even with extra help flowing to the economy from the tax cuts, the Fed probably will stick to its plan, economists said. The tax cuts reduce pressure on the Fed to buy more bonds. But the prospects of high unemployment well into next year will keep the Fed from scaling back purchases, economists predicted

Even with its second dose of stimulus, the Fed had projected the jobless rate could be as high as 9.1 percent next year and 8.2 percent in the 2012 presidential election year.

Bernanke recently warned that it could take four or five more years for unemployment to fall to a historically normal 5 percent or 6 percent.

Notice how we are being sold this line at every opportunity. Just imagine if the man in charge of economy for the Bush administration had ever said such a thing.

But the AP buries this in the last paragraph of their article, in the hopes of getting us used to the idea — Mr. Obama’s ‘new normal.’

So by the time 2012 rolls around we will have forgotten that there ever was such as thing as 5% unemployment. Or that our news media called that a recession under President Bush.

This article was posted by Steve on Tuesday, December 14th, 2010. Comments are currently closed.

One Response to “Fed To Review $600B Bond Buying (QE2)”

  1. P. Aaron says:

    Didn’t the Feds at one time, jail people for selling junk bonds?

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