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NYT: $800B Spent On QE3 Just Made Rich Richer

From the New York Times:

What the Nation Got for $800 Billion

By ANNA BERNASEK | August 3, 2013

SINCE last September, when the Federal Reserve announced its third round of quantitative easing, known as QE3, the central bank has spent $800 billion buying bonds. That’s a stupendous sum, more than the budget for the Department of Defense and more than twice what the federal government spends on welfare programs, including food and nutrition assistance, unemployment benefits and disability payments.

This raises an intriguing question: What did the United States get for all that money?

Saturday, August 3rd, was a red letter day. The New York Times actually questioned the wisdom of printing money. (Of course, they have their own agenda at work here, as we shall soon see.)

Like previous rounds of quantitative easing, the goals for QE3 included reducing long-term rates, in that way bolstering lending, housing and employment… Now, though, rates are actually higher than when QE3 began.

Lending has increased for cars and commercial property, she says, but not for small business. New mortgage origination for housing remains weak.

Isn’t that the way things always turn out for Obama?

Meanwhile, the Fed’s outsize presence in the markets for Treasuries and mortgage-backed securities may have changed those markets in ways no one can predict.

QE3 was intended to make riskier assets like stocks more appealing. And stocks, which are predominantly owned by the wealthy, have risen in price. As a Bank of England study has shown, quantitative easing disproportionately benefits those who are already well off.

And never mind that this was completely predictable. And no accident for Obama. Which is why the rich gave him $1 billion dollars for his last campaign.

The Fed had other options. It could have put cash directly into the hands of consumers who needed it. Under the Federal Reserve Act, it can print and lend any amount of money for any length of time to any person or entity, as long as it is satisfied that it is likely to be repaid. With $800 billion, for example, the Fed could have given every homeowner in the country a $10,000 loan at a near-zero rate of interest. Think of what that might have done for the economy.

This is what passes for sound economic thought at The Times. And never mind that all this would have done is drive up the price of housing, which needs to be un-inflated, not re-inflated.

Meanwhile, the New York Times completely ignores how Bernanke’s printing press is continuing the devalue the dollar and destroy the middle class. 

Something that is so obvious that the even the Associated Press has had to finally admit it:

Oil rises to near $107 on Fed stimulus hopes

By Pamela Sampson | August 5, 2013

BANGKOK (AP) — Oil rose to near $107 a barrel Monday after a disappointing U.S. jobs report made it more likely the Federal Reserve will continue its stimulus program beyond September.

Benchmark crude for September delivery was up 3 cents to $106.97 at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 95 cents to close at $106.94 a barrel on Friday…

The bond purchases have pushed down interest rates, which makes money available for spending and investment. But the purchases also inject more dollars into the economy, which lowers their value. That tends to push up the price of oil as it becomes more affordable for investors using other currencies

This is another red letter day, Since this is the first time we have ever seen the AP or any mainstream media outlet admit this obvious fact.

But notice that they don’t admit that this devaluation isn’t just limited to oil. Food, clothing, everything will continue to cost more because of printing all of this money.

This article was posted by Steve on Monday, August 5th, 2013. Comments are currently closed.

2 Responses to “NYT: $800B Spent On QE3 Just Made Rich Richer”

  1. GetBackJack says:

    Well, talk about truth.

    (it’s always about opportunities for graft)

  2. Petronius says:

    There is a lot of debate about whether Quantitative Easing (Fed money printing) is generating inflation, or rather how much inflation.

    Inflation in the US is calculated by the Bureau of Labor Statistics (BLS) in the Consumer Price Index, or CPI. It is used by the Fed to justify its money printing policies, by the Federal government to calculate cost-of-living adjustments (COLA) for the entitlement programs (e.g., Social Security, the Civil Service Retirement System, etc.), and to set the interest rate on inflation-adjusted Treasury bonds known as TIPS. 

    Indirectly, the CPI influences interest rates, the stock market, the bond market, the commodities markets, and a host of salary and pension negotiations each year. Furthermore, the cost estimates underpinning ObamaCare are founded on inflation projections that draw upon low CPI readings for their baselines. But if the CPI is too low, even by a single percent, the impact in terms of economic distortions is massive.

    Consequently, it is important that our assessment of inflation be as accurate as possible.

    Unfortunately, however, the CPI understates inflation, which is actually worse than we’re told. The old CPI yardstick was overhauled in the 1980s, and since then it has been modified nine times, and each modification tends to minimize the rate of inflation.

    The biggest CPI components are those for housing, which account for a little over 41 percent of the CPI. As long as the Fed keeps a lid on interest rates, housing costs remain low. The other CPI components are food & beverage (15.3%), apparel (3.6%), transportation (16.9%), medical care (7.1%), recreation (6%), education & communication (6.8%), and other goods & services (3.4%).

    For obscure reasons, the BLS only weights healthcare at 7.1 percent of the CPI, although it represents 17.6 percent of our total GDP.  That’s a big problem, because healthcare has been a consistent driver of inflation over the years.

    Another problem is that medical care as a CPI component excludes all government expenditures for healthcare (primarily Medicare and Medicaid reimbursements), and does not count the rising costs of private health insurance to businesses and individuals.  After subtracting out these expenditures only 7.1 percent remains from the 17.6 percent of total GDP. Moreover, as almost every observer acknowledges, we are on the brink of substantial health insurance premium increases from ObamaCare.

    But that’s not all. Critics claim that by using the old CPI methodology from the 1980s, real inflation is about 9 percent rather than the 1.5 percent being reported.

    In addition to healthcare and health insurance, there are three other big ticket items that are skyrocketing in cost, but which are underweighted or not counted in the CPI:

    • college tuition and fees
    • day care and preschool
    • kids’ activities

    A retiree on Medicare and poor people covered by Medicaid are generally not too concerned about these items, but for a young family these costs can have a serious impact on household budgets.

    Here is an example of stealth inflation: Using the BLS Inflation Calculator, $1 in 1980 = $2.83 in 2013. Thus the average cost of a new car in 1980 was $7,200 and so the inflation-adjusted price in 2013 should be $20,376. But the actual average price in 2013 is around $31,000. This is a big discrepancy, which tells us that something is out of kilter with the government’s indexes. By the same measure, the cost of medical care has increased 613 percent and college tuition and fees by 1,140 percent since 1980.

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