Tuesday, September 18, 2012

QE3 Means That Obamanomics Has Failed

The Federal Reserve announcement last week that it would be buying $40 billion in mortgage bonds a month with no time limit means one thing.

It means that the economic policy of the Obama administration has failed and the federal government has embarked upon a policy of inflation.

That means that the American people are going to get screwed.  Twice.

First of all the American people are going to get their savings shriveled in two ways, first by the artificially low interest rates and secondly by the declining value of the dollar.  Of course, we may end up in hyperinflation, and the dollar will end up worthless.

Secondly the American people are going to suffer terribly when the inflationary boom ends and we have a cruel depression.

So that is what the glorious vision of President Obama's 2004 speech to the Democratic National Convention adds up to.  Inflation.  Depression.  Cruelty.  Injustice.  A divided nation.  God knows how it will all turn out.

The question that lurks behind all of the late dynasty failure and incompetence and "bad luck" is what comes next.

Can we refound the American experience on a new birth of freedom?  Can we build a new civil society on the ruins of big government compulsion?  Can we inspire the American people to believe that government is not the answer to our problem: government is  the problem?

Nobody knows.  All we do know is that the liberal elite has thrown in the towel and admitted that its model of governance doesn't work.

That's QE3 means.  That is what a policy of inflation always means.  It means that the government has deliberately decided to steal money from the American people.  It means that the government has to steal money from the American people to pay its supporters.

It means that the Obama years are not going to end well.  They are going to end in tears.  Or worse.

1 comment:

  1. Perplexed in SeattleSeptember 19, 2012 at 6:55 AM

    I've been reading the economist Scott Sumner lately and he's of the opinion that most economists don't put much stock in fiscal stimulus i.e. government spending as a tool to spark an underperforming economy.

    Instead they believe monetary stimulus is a more more reliable tool. A central bank isn't beholden to politics like a legislature or as much anyway.

    Monetary stimulus is used all the time. How many times have we heard about other countries devaluing their currency? China always manipulates her currency to peg its value at a specific level in relation to the U.S. dollar. This is designed to make China's exports always affordable for U.S. consumers.

    Yes, monetary stimulus punishes savers - if savers "save" currency.. There's other things you can save like gold and silver as a hedge against currency devaluations.

    Yes monetary stimulus causes inflation like a rise in the gasoline price. But if the economy reaches a targeted level of growth then this rise in commodity prices is a one-time affair and then central bank policy can return to curbing inflation.

    Suffering through an underperforming economy for many years waiting for it to revive in the course of things has few upsides and many downsides.

    Sumner believes the Fed is only doing 10 percent of what people like him recommend.. He says he's a glass half full kind of guy so he's contends this is better than nothing. I believe this caution is because the Fed is concerned about the reactions of other central banks.