Posted tagged ‘economic crisis’

Quantitative Easing

November 29, 2008

When the Federal Reserve announced its new $800 Billion rescue package earlier this week, the phrase “quantitative easing” began appearing in numerous articles discussing the announcement. Not being an economist, the phrase was new to me and I wanted to know exactly what it means.

I found an absurdly simple definition at Guardian.co.uk:

“Quantitative easing is what non-economists call ‘turning on the printing press’.

In extreme circumstances, governments flood the financial system with money, easing pressure on banks by giving them extra capital.

Ben Bernanke, the chairman of the Fed, won the nickname ‘helicopter Ben’ when he floated just such an idea earlier this decade. US economist Milton Friedman had originally said it would be theoretically possible for governments to drop large amounts of cash out of helicopters for the public to pick up and spend. ”

And Ohio.com lays it out pretty plainly in an article titled, Federal Reserve uses power to print money.

Ok, that’s easy enough to understand, but can it work? Japan tried it from 2001 – 2006. Nobody is certain yet if it was helpful or harmful. Germany tried it following World War I and it was an absolute disaster. Somehow, I don’t find either example reassuring.

It may be time to get a wheelbarrow.

I blew it: Bernanke

November 26, 2008

From Business Day:

I blew it: Bernanke

US Federal Reserve chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market’s collapse.

”I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke says in an article in the December 1 issue of The New Yorker magazine.

”The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said in the piece titled ”Anatomy of a Meltdown.”

Continue reading…

”The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said.

Not really, Ben.

If you’d listened to Ron Paul and Peter Schiff you would have known. If you ever read anything on Mises.org or LewRockwell.com you would have known.

The Root of the Economic Crisis

November 23, 2008

There is plenty of blame for the economic meltdown to spread around – government, banksters, people living beyond their means, and most especially the Federal Reserve (which is no more “Federal” than Federal Express). But the heart of the matter is the misguided Orwellian concept that Debt is Wealth.

This concept took root when the Fed was allowed to take control of the nation’s money supply in 1913. It is how the Fed’s owners make their profit. Woodrow Wilson signed the Federal Reserve Act of 1913 into law and even he eventually realized what a mistake that was. He said, “I am a most unhappy man. I have unwittingly ruined my country.”

The Federal Reserve has been inflating the U.S. dollar since 1913. The dollar has lost over 96% of its purchasing power over the last 95 years, making one 1913 dollar worth less than 4 cents today. What happens when we finally arrive at the point when the dollar loses 100% of its purchasing power? That may be the realization Wilson arrived at too late.

Debt is not wealth. The sooner we, as a nation, realize this and the sooner our government begins behaving accordingly, the sooner we can begin to take the right steps toward correction. If this lesson is not learned, we may be in for more “interesting times” than any of us would like.