The Fed's QE2 Program: Not Meant to Help Main Street

Quantitative Easing II:
This is truly insanity. Here’s how it works with a nice little diagram from the NY Times for visual clarification. The Fed “creates” money and credits its own account. The Fed uses the money to buy Treasury bonds from dealers like Citigroup and JP Morgan. The purchases of Treasuries are SUPPOSE to inject money into financial system with the desired effect of lowering interest rates due to more money in the system. This in turn will stimulate the economy as it encourages consumer and business spending and promote job growth.

From the NY Times (click to enlarge).

But the rates have increased and self-described “experts” say the financial institutions, such as those noted above, are refusing to lend because they “fear an unstable economy. But is that the real reason they are not lending? Where did they put the money they received for the T-bonds? Professor Michael Hudson says these financial institutions have invested the money overseas in currencies, securities, and other investments. In an article by Mike Whitney, he makes the case that QE2 was designed to create an exchange rate war so as to push the dollar down. By pushing the dollar down the debt burden to foreign nations (such as China) is reduced:

The Fed is at war; that’s the truth of the matter. Economist Michael Hudson calls Quantitative Easing (QE) “a form of financial aggression.” But Hudson probably understates the case; “monetary terrorism” (moneterrorism?) is probably closer to the truth. QE is flooding emerging markets with cheap capital that’s forcing their leaders to take defensive action to protect their economies. EM’s have already seen the first wave of liquidity surge into their markets raising havoc with prices and forcing central banks to raise rates. But emerging markets aren’t taking it laying down. They’re throwing up protectionist barriers and monitoring capital flows. If Bernanke’s going to print more money, they’ll print, too. Mass competitive devaluation will ignite a full-blown currency war that leaves the present trade regime in tatters and the dollar in the dustbin.

How does it feel to know that you are once again giving out a massive handout to the very Banks involved in the 2008 economic crisis?

How does it feel to know that banksters such as JP Morgan have just sold you T-bonds with money created out of thin air by the Federal Reserve?

Do you really think those T-bonds are worth anything? Personally, I think the Fed just bought a bunch of crap, IN OUR NAME, and the Bankers just ran off with the money again. Meanwhile, as the dollar declines in value mass inflation is right around the corner.

The Fed’s QE2 Traders, Buying Bonds by the Billions

Fred R. Conrad/The New York Times

Blake Gwinn, left, and James White in the Operations Room.

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