Monday, December 22nd, 2014

Feud at The Fed: “Horrific Consequences” for Unlimited Easing

Activist Post
Activist Post
November 28th, 2012
Reader Views: 2,326

The Fed’s plan to purchase $40 billion in mortgage-backed securities and $45 billion in long-term US Treasuries every month for the foreseeable future is now creating internal feuds.

The Federal Reserve’s latest round of quantitative easing has no timetable to end or measurable goal. Yesterday, the Dallas Fed President said this policy without limits would result in “horrific consequences”.

Reuters is reporting today on these “deep divisions” at the Federal Reserve:

Charles Evans, president of the Chicago Federal Reserve Bank and one of the Fed’s most outspoken doves, said interest rates should stay near zero until the jobless rate falls to at least 6.5 percent. Such a policy would carry “only minimal inflation risks,” and could boost growth faster than otherwise, he said.

Evans, who rotates into a voting seat on the Fed’s policy-setting panel in January, also said the Fed should step up its program of quantitative easing in the new year to keep its overall level of asset purchases at $85 billion a month for most, if not all, of 2013.

But Dallas Fed President Richard Fisher, a self-identified inflation hawk, said the U.S. central bank could get into trouble if it does not set a limit on the amount of assets it is willing to buy.

“You cannot expand without limits without horrific consequences,” he told reporters on the sidelines of the conference organized by the Levy Economics Institute in Berlin. “There is no infinity in monetary policy, we know that from the German experience.”

No one at the privately-owned US central bank has been able to explain how spending $85 billion per month ($1.02 trillion for 2013) on these purchases will reduce unemployment and maintain dollar price stability, the only tasks the Fed is charged with.

In fact, they don’t even pretend to be achieving these duties anymore. Both Evans and Fisher agreed that fixing unemployment is more important than controlling high inflation. Therefore, they’re willing to trade one for the other.

“I am not worried about inflation right now, I am worried about an underemployed workforce in America,” said Fisher indicating that he is willing to go along to get along despite his “horrific consequences” remark.

Evans believes the Fed should keep interest rates at zero, continue or even “ramp up” purchasing Treasuries and mortgage-backed securities until the unemployment rate is 6.5 – 7 percent and inflation doesn’t threaten 3 percent.

And, of course, they are using the “official” numbers for inflation and unemployment which everyone now knows are bogus to begin with.

The only reason the official unemployment number is marginally improving is because hundreds of thousands are scrubbed from the equation.

In September, Bloomberg reported, “The unemployment rate fell to 8.1 percent from 8.3 percent, but that was only because 368,000 people left the labor force. The share of working-age people who are either working or looking for work—known as the labor-force participation rate—fell to its lowest level since September 1981.”

Source

So it is highly unlikely that buying bad paper from banks and monetizing the US government’s debt will make one bit of difference for the real unemployment problem no matter how much they spend doing it. And when it doesn’t work, we can be assured of one thing, they will throw even more money at it and it will most certainly result in “horrific consequences” for the value of the dollar.

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  • Jean

    When voting, we must vote for people who know more than how to present well and read a teleprompter. They should actually have experience in the work world. This why there was a limited franchise.

    At the same time we expanded the franchise, we dumbed down the people – and then came media, and hyper-stimulation (video games especially)…
    Now, if it can’t be said in 30 seconds or less, communicated in mono-syllabic grunts, or has no explosions – the people figure it must not be important… Imbeciles running the asylum.

  • http://T Evie

    I wonder how many against quantitive easing were pro preditory lending and bundling up mortgages as securities. I bet most were pro bank bailouts too. Where did all of the money go ?

  • http://www.us-funding-solutions.com/nonperformingnotes/ Bopster

    There’s an old saying. I believe it goes like this. “If you always do what you’ve always done, you always get what you always got.” Printing money to buy worthless assets hasn’t and will continue not to work, at least not for anyone but the banks.

    • Nexus789

      Or alternatively as Einstein commented along the lines – doing the same thing over and over and expecting a different outcome is a sign of insanity.

  • johnd24

    unemployment rate fell, that’s straight out lie. Things are continuing to get worse.

    • johnd24

      its more like 50% not 8%…who are unemployed

  • http://T Evie

    Sounds like a great plan. Put the banks first, loose confidence, lay people off and wonder what sucker will pick up the debt to suport them all.

  • stock

    eff the bankers and brokers

  • Nexus789

    The only thing keeping the Dollar from collapsing is the US currency’s strangle hold on commodities trading – countries have to have a stock of Dollars to trade, oil, gas, corn, etc. If this hold was broken the US Dollar would collapse immediately. This is generally why America goes to war – to protect the hegemony of the Dollar.

    If the Dollar did collapse the consequences inside the the US would be unimaginable – everything would be super expensive almost overnight. It would simply reflect the fact that the US has been living beyond its means – but this would occur in an instant.

    • Nexus789

      It is also why the Fed can keep on printing dollars – the more dollars ‘printed’ the harder the fall if the dollar ceases to be the ‘reserve’ currency.

  • Mark

    What do you think will happen when our government has to borrow the next 6 trillion dollars just to keep the country from falling into a black hole over the next four years? Do you really think this administration is going to make the necessary cuts to stop the borrowing anytime during this decade? And we will be too far in debt to even pay the interest on our debt by the next decade! The policies of this administration have ensured that hyperinflation will be in our near future. The globalist elite will have to start another world war to keep people from revolting against the governments that they control.

    What are your plans when the government cannot continue funding the Obama welfare state and they make you work as government slaves? Are you ready for the riots, rationing, class and race wars and the inevitable martial law that may come sooner than you may think? Some Americans wanted an Obama nation and all Americans will get what some asked for.

  • superdave:-)

    The election just passed was irrelevant, neither candidate was going to attack the real enemies of Liberty and the American people…the privately owned Federal Reserve and it’s owner banks and private parties. We need another Andrew Jackson. The great unraveling is going to happen; it can’t be stopped, we’re already passed the tipping point. The only thing missing is the spark the ignites the whole conflagration. Prepare, prepare, prepare. Everything else is a sideshow.

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