The Fed announced today that it would restart the printing press at a rate of $40 billion per month. The newly printed money will be invested in Mortgage Backed Securities (since the Fed has already nationalized most of the treasury market). Including the extension of Operation Twist, the Fed will buy $85 billion per month in long-term securities. Don’t forget to send the Chairman a thank you card Mr. President.
So even though QE II, zero percent interest rates, a commitment to hold rates at zero for what seems like forever, Operation Twist I and Operation Twist II have had almost no discernible impact on the real economy, Bernanke is doing more. And not only more, but he is going all in. This time there is no end in sight to the money printing. The Fed is going to keep the printing presses rolling until the economy improves and if it doesn’t, guess what? Bernanke will just print more.
I don’t have a PhD in economics from MIT like Dr. Bernanke (thus I am employable), but I do know that free market economies self-correct. In spite of more Fed money printing, the U.S. economy will eventually recover.
Dr. Bernanke’s scheme to keep printing until the economy improves looks like nothing more than a tacit admission that quantitative easing doesn’t work. But rather than openly acknowledging that the Fed is out of bullets, Bernanke has decided to do away with the report cards. Thus, it doesn’t matter if money printing works or not, when the economy recovers the Fed’s money printing will be given credit. What a farce.
Jeremy Jones, CFA
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