Here, we call it quantitative easing.
Wow, that’s a really tortured way of saying printing money. Everyone knows printing money is bad. Every politician and economist, deep in their hearts, knows there is no free lunch–that is unless you are a member of the Paul Krugman fanclub.
There WILL be consequences to the Fed making up $4.5 trillion out of thin air. There always are consequences. The problem is that you just always can’t foresee in what form they will materialize.
So the Federal Open Market Committee minutes of their recent meeting are going to be released today. This is the group of wizards who look into the crystal ball every month and decide how to financially engineer the U.S. economy. Over the last decade, they have decided that in order to save us from our free-market principles, they would print almost five trillion dollars and distort the U.S. bond market by acting as a buyer and keeping interest rates low.
Of course, there was no collusion between the White House and the Fed on this effort. The fact that if interest rates rise we can’t service our debt (and social spending would be obliterated) is not the point. The point is the Fed says they did this in order to achieve full employment.
And they have succeeded! Unemployment is way down in the six percent handle. The fact that one-hundred million Americans have given up looking for work and left the workforce is not to be uttered in the hallowed halls of the Federal Reserve.
In any event, most likely today, we will be given the wonderful news that the Fed has decided to stop easing quantitatively. I feel much better, don’t you? They still are keeping short term rates at zero, and they still have to pull five trillion dollars back out of the economy at some point; but Obama will be out of office by then (at least I think), and he won’t have to worry about it.
Whew, I feel better knowing he won’t have to face the consequences of his actions. But when has he faced any consequences? (That’s another column.)
The market will have to face this modicum of financial responsibility. And the markets are not going to like it.
Markets never like rising rates. It’s not different this time.
America can’t get away from the fact that we have been living on a QE sugar-high, an irrational bond market, and debt. At some point, we will have to pay the piper.
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This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom