Quantitative Easing Benefits the Super-Elite … And Hurts the Little Guy and the American Economy

[sjk]

I’m soooooooo…….sick of the FED, and there on going bailout of big banks…….this is noting more then an extraction of money from those with little to those with more…..

Posted on December 13, 2012 by WashingtonsBlog
Quantitatitve Easing Is Not “Liberal” Economics

http://www.washingtonsblog.com/2012/12/quantitative-easing-benefits-the-super-elite-and-hurts-the-little-guy-and-the-american-economy.html

The Fed has just announced its fourth round of “quantitative easing”.

While the mainstream financial press pretends that quantitative easing is a “liberal” economic policy, nothing could be further from the truth.

As we’ve repeatedly explained, quantitative easing is a bailout for the super-rich, at the expense of the little guy. It increases inequality and fails to stimulate the economy. (And it destroys the savings of retirees.)

Indeed, Fed boss Ben Bernanke knew 24 years ago that quantitative easing doesn’t help.

Forbes’ Lawrence Hunter explains:

The Federal Reserve … operates its own financial Laundromat for troubled, in some cases criminal banks. The Fed’s loan laundry and downscale resale consignment shop first takes in the wash by purchasing non-performing, and therefore largely worthless financial assets (loans and loan-backed securities) to remove them from the books of private banks. (Another variant is for the Fed to swap the banks’ bad paper at face value for federal debt instruments, which replaces the banks’ non-performing assets having little, if any, resale value, with safe, interest-paying and highly marketable assets.). The Fed then launders the loans by reselling them back to the same group of banks at a fraction (10 percent or less) of the face-value price it paid the banks for them. Once the banks repurchase the spiffed up dirty loan laundry, it not only has turned a nifty 90-percent-or-more profit on the turn around, it also has a new asset it can put back into the stream of financial commerce at a price reflective of its true value.

The Fed is a perfect vehicle to transform bad assets into good. It is weakly overseen without an independent audit and thus is able to intermediate the transformation of bad, illiquid assets into money (and near money) and then back again into valuable financial assets, all done secretly and anonymously. Unlike the polite, don’t-ask-don’t-tell fiction of private hedge-fund money laundering, however, the Fed says outright, “Don’t ask, because we aren’t telling,” even when asked again and again.

Immediately after the 2008 financial meltdown, the Fed laundered more than $2 trillion in worthless assets held on the balance sheets of private banks. According to a watered-down 2011 audit of the Fed by the Government Accountability Office (GAO), there have been $16 trillion in Fed bailouts to banks and corporations around the world since the financial meltdown in 2008. Since that report, Bloomberg has reported on an additional $9 trillion in secret, off-balance-sheet Fed transactions that the central bank refuses to discuss. Now, Ben Bernanke is ginning up assembly-line washing machines at the Fed with QE∞ to spin an opened-ended, $40-billion-monthly cleansing campaign to purchase worthless mortgage backed securities from banks at face value, which could run to an additional $1.3 trillion loan laundering accompanied by downscale resales.

Indeed, the Fed:

Gave huge bailouts to foreign banks, including Gaddafi’s Libyan bank, the Arab Banking Corp. of Bahrain, and the Banks of Bavaria, Korea and Mexico;
Bailed out hedge funds, McDonald’s and Harley-Davidson
Threw money at “several billionaires and tens of multi-millionaires”, including Christy Mack, the wife of Morgan Stanley’s John Mack, billionaire businessman H. Wayne Huizenga, and Michael Dell, co-founder of Dell Computer, hedge fund manager John Paulson and private equity honcho J. Christopher Flowers
Hunter continues:

QE∞ is no mere financial Laundromat; it is a full-service loan laundry and downscale resale facility that not only cleans the banks’ balance sheets but also sterilizes the entire operation to prevent it from producing immediate price inflation. It illustrates the way the Fed’s loan laundry and downscale resale facility works:

After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans. [I’ve explained the mechanism for the Fed’s action before.] To affect this quarantine, the Fed wields both a carrot and a stick to keep this newly minted digital money from seeping out into the economy through new loans and igniting inflation: It pays the bank interest on its Fed reserves as long as the bank keeps the funds on deposit at the Fed (the carrot); and it tightens reserve requirements by raising the amount of money the bank must keep on deposit at the Federal Reserve (the stick).

There are much better ways to stimulate the economy, but the Fed is only interested in maintaining the status quo for its owners. And see this.

[Coronita]

Not my problem…..

I was against all this “tax people more (particularly “quasi-rich”), so we can spend even more then we collect”…But apparently a lot of voters thought it was a good thing…Because after all, it’s always rich people’s fault….

Not my problem, not my concern… Now where are my refinance papers again….

[SD Realtor]

Obviously Bush is behind all of this, even QE4, 5, 6 and 7!

[Coronita]

[quote=SD Realtor]Obviously Bush is behind all of this, even QE4, 5, 6 and 7![/quote]

It’s not possible Bush is behind it… Because many people think Bush is intellectually challenged and can’t count that high.

[sjk]

[quote=flu]Not my problem…..

I was against all this “tax people more (particularly “quasi-rich”), so we can spend even more then we collect”…But apparently a lot of voters thought it was a good thing…Because after all, it’s always rich people’s fault….

Not my problem, not my concern… Now where are my refinance papers again….[/quote]

Enjoy your place setting at the captain’s table flu, it will be in do course, as your on the Titanic…..

Regards,

[SK in CV]

[quote=SD Realtor]Obviously Bush is behind all of this, even QE4, 5, 6 and 7![/quote]

I’m quite sure nobody has ever claimed that Bush is behind it. It’s as ridiculous a claim as that which charges this is Keynesian economics at work. It’s not. Keynes, at most, was agnostic on monetary manipulation as a means of economic stimulus.

I’m not so sure that it doesn’t benefit the economy as a whole, but there’s no question that the biggest beneficiaries are debt holders. That’s the big banks. Is there a better way to do the same thing or better for the economy as a whole without particularly benefitting the banking industry? I could be convinced, but I haven’t seen any ideas that meet the requirements.

[livinincali]

I’m just waiting for the never could have seen it coming. We’re about there now. Almost 4 years of various QEs and nothing bad has happened yet, so nothing bad will happen in the future. The only real question now is how and when it comes unglued.

[livinincali]

[quote=SK in CV]
I’m not so sure that it doesn’t benefit the economy as a whole, but there’s no question that the biggest beneficiaries are debt holders. That’s the big banks. Is there a better way to do the same thing or better for the economy as a whole without particularly benefitting the banking industry? I could be convinced, but I haven’t seen any ideas that meet the requirements.[/quote]

In my view the primary purpose of QEx is to allow the government to deficit spend over a trillion per year. The government would probably have to pay too much to incur that much debt without it. The fundamental problem is every economist/policy maker is focused on the demand side of the equation and how to create more debt to stimulate demand. It’s an idea that has run it’s course, but it doesn’t stop them from trying it’s the only thing they know.

[Diego Mamani]

There is no “FED.” Fed is short for Federal Reserve Board. You can write FRB if you like acronyms, but most people who know what the institution is write “Fed.”

[an]

[quote=sjk][quote=flu]Not my problem…..

I was against all this “tax people more (particularly “quasi-rich”), so we can spend even more then we collect”…But apparently a lot of voters thought it was a good thing…Because after all, it’s always rich people’s fault….

Not my problem, not my concern… Now where are my refinance papers again….[/quote]

Enjoy your place setting at the captain’s table flu, it will be in do course, as your on the Titanic…..

Regards,[/quote]Why wouldn’t you. If you know you’re on the Titanic and it’ll crash some day. Why not sit at the captain’s table AND secure your own life vessel when the time comes. What’s the point of running around in the boiler room complaining the captain is going to kill us all.

[scaredyclassic]

individualsand business sometimes are headed for bankruptcy and things aren’t cataclysmic; they emerge healthier after the process.

i don’t know, but is it possible everything could be ok?

[SD Realtor]

Anything is possible.

It is possible I will win the lottery. Highly improbably but possible.

Just in case I don’t though I am trying to take some measures to be prepared. I think having land and water is a good first step.

[paramount]

A lot could be said, instead take a look at this expose of a Detroit school:

http://www.businessinsider.com/photos-of-abandoned-detroit-high-school-2012-12#-1

Detroit Decline:

http://www.businessinsider.com/the-incredible-decline-of-detroit-photos-2012-10#hutchins-coles-garden-1987-1

For many areas of the country, I’m afraid these are pictures of the future.

“Our entire economy is a giant mirage. Our prosperity has been purchased by stealing from the future. A few people have been warning that we have completely destroyed our future in the process, but both major political parties just continue to do it and the mainstream media just continues to cheer them on.

At some point this con game will end and this economic mirage will disappear. When that happens, millions of people all over this country are going to become very angry and very desperate.

I hope that you have a plan for what you will do when that happens.”

[scaredyclassic]

i guess ive just expected the jig to be up for so long that now Im thinking the jig will stay down probably till i’m dead. the jig is uncertain after that.

reps with 235 today, masterfully, if I do say so myself. physical ability may matter more int he future.

[ucodegen]

[quote=squat300]i guess ive just expected the jig to be up for so long that now Im thinking the jig will stay down probably till i’m dead. the jig is uncertain after that.

reps with 235 today, masterfully, if I do say so myself. physical ability may matter more int he future.[/quote]If you are planning for the future, make sure you get some work in on the upper body too…

Personally I am consider that they are going to ‘inflate’ their way out of it… It causes the house prices to rise to the values of the underlying notes, and allows the gov to spend like crazy.

[Author]

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