The history of government management of money has, except for a few short happy periods, been one of incessant fraud and deception. Friedrich Hayek
The day after the election the Federal Reserve launched QE2, the second round of Quantitative Easing. This public relations euphemism attempts to hide the fact that the Fed is “printing money” (the Fed actually does it electronically these days). “Cheating, debasing and inflating,” as in stealing from the public, is a more accurate description.
Bernanke indicated from 600 to 850 billion additional dollars would be created. To put this in perspective, the Tarp package was in this range. The total Federal Reserve balance sheet was $829 billion at the end of 2004 and only $869 billion in August 2007. At the end of 2009 it had ballooned to over $2,200 billion. This announcement means it is headed to $3,000 billion (3 trillion).
Ben Bernanke weakly defended his action with the following justifications:
- … further support to the economy is needed
- Easier financial conditions will promote economic growth.
- higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.
The first two statements are true as stated, but unlikely to be affected by additional QE. The third is partially true, although it is unclear that his action will raise stock prices. Furthermore, empirical data is not supportive of the alleged relationship between stock prices and spending (see the Kass reference below).
The Real Reason for QE2
Mr. Bernanke’s justification for committing nearly another trillion dollars does not meet the “smell” test.