Saturday, September 15, 2012

QE 3, No Change, just More Smoke and Mirrors

After five and a half trillion dollars of stimulus during the last four years Ben Bernanke is again pushing on the string. On Thursday he announced the start of QE3. I find myself camped out with those that feel troubled, noting that each time the Federal Reserve adds liquidity to the system it produces less results and more negative side effects. While one might argue that it will help reduce unemployment at the margins, this policy cuts both ways, causing offsetting damage to savers.

QE 3 may have begun, but it is far from an answer to all our woes. Yes the stock market has continued to move up as more savers are forced to move to riskier investments in an effort to protect their assets from inflation.and the dropping dollar. If markets turn south these investors will be crushed. With the dollar moving lower foreign money is less likely to move to America or buy our bonds. The American dollar is the world wide reserve currency, if money begins to move offshore at an accelerated rate this could spell disaster for America.

The fact that Ben Bernanke is continuing on this course make one wonder, what does the Fed know that we don't?  How afraid are they of the economic clouds on the horizon?  Despite a media that is trying to put a positive spin on the economy as the Presidential election and the "fiscal cliff" approaches many Americans and much of the world is mired in an economic morass. Do not be surprised if things get much, much worse.                                

To better understand my concerns, please see my August 12th post; Low Interest Rates Distort The Economy


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