This states the long since obvious which is that QE was all about
replacing Wall Street’s capital and eliminating the losses incurred through the
reckless lending promoted by both the politicians and the far too happy to
oblige brokers. The cover story about it
helping Main Street is true enough but only indirectly. Actual complete elimination of all credit was
what was been faced here and that is an unnatural disaster we do not need. We tried it once during the Depression and it
did not work so well. Our problem this
time is that it has taken a full four years to sort the damage out and during
this period, it was impossible to promote badly needed fresh credit. That is now changing.
I return to my thesis that fiat currency creation needs to be driven
sharply down market where it can be totally effective and to eliminate the
temptation of bankers to play king.
State banking would be a great start as would be state managed medical
insurance. The federal level
participates as a joint venturer and capital source
Of course, change must be done in the face of massive PR campaigns from
entrenched exploiters..
Federal Reserve Whistleblower Tells America The REAL
Reason For Quantitative Easing
By Michael Snyder,
on November 12th, 2013
A
banker named Andrew Huszar that helped manage the Federal Reserve's
quantitative easing program during 2009 and 2010 is publicly apologizing for
what he has done. He says that quantitative easing has accomplished next
to nothing for the average person on the street. Instead, he says that it
has been "the greatest backdoor Wall Street bailout of all
time." And of course the cold, hard economic numbers support what
Huszar is saying. The percentage of working age Americans with a
job has not improved at all during
the quantitative easing era, and median household income has actually steadily declined during
that time frame. Meanwhile, U.S. stock prices have doubled overall, and
the stock prices of the big Wall Street banks have tripled. So who
benefits from quantitative easing? It doesn't take a genius to figure it
out, and now Andrew Huszar is blowing the whistle on the whole thing.
From
2009 to 2010, Huszar was responsible for managing the Fed's purchase of
approximately $1.25 trillion worth of mortgage-backed securities. At the
time, he thought that it was a dream job, but now he is apologizing
to the rest of the country for what
happened...
I can only say: I'm sorry, America. As a
former Federal Reserve official, I was responsible for executing the
centerpiece program of the Fed's first plunge into the bond-buying experiment
known as quantitative easing. The central bank continues to spin QE as a tool
for helping Main Street. But I've come to recognize the program for what it
really is: the greatest backdoor Wall Street bailout of all time.
When
the first round of quantitative easing ended, Huszar says that it was
incredibly obvious that QE had done very little to benefit average Americans
but that it had been "an absolute coup for Wall Street"...
Trading for the first round of QE ended on
March 31, 2010. The final results confirmed that, while there had been only
trivial relief for Main Street, the U.S. central bank's bond purchases had been
an absolute coup for Wall Street. The banks hadn't just benefited from the
lower cost of making loans. They'd also enjoyed huge capital gains on the
rising values of their securities holdings and fat commissions from brokering
most of the Fed's QE transactions. Wall Street had experienced its most
profitable year ever in 2009, and 2010 was starting off in much the same way.
You'd think the Fed would have finally stopped
to question the wisdom of QE. Think again. Only a few months later—after a 14%
drop in the U.S. stock market and renewed weakening in the banking sector—the
Fed announced a new round of bond buying: QE2. Germany's finance minister,
Wolfgang Schäuble, immediately called the decision "clueless."
That was when I realized the Fed had lost any
remaining ability to think independently from Wall Street.
Of
course the fact that the Fed cannot think independently from Wall Street should
not be a surprise to any of my regular readers. As I have written
about repeatedly,
the Federal Reserve was created by the Wall Street bankers for the benefit of
the Wall Street bankers. When the Federal Reserve serves the interests of
Wall Street, it is simply doing what it was designed to do. And according to Huszar,
quantitative easing has been one giant "subsidy" for Wall Street
banks...
Having racked up hundreds of billions of
dollars in opaque Fed subsidies, U.S. banks have seen their collective stock
price triple since March 2009. The biggest ones have only become more of a
cartel: 0.2% of them now control more than 70% of the U.S. bank assets.
But
Huszar is certainly not the only one on Wall Street that acknowledges these
things. For example, just check out what billionaire hedge fund manager
Stanley Druckenmiller told CNBC about
quantitative easing...
"This is fantastic for every rich
person," he said Thursday, a day after the Fed's stunning decision to
delay tightening its monetary policy. "This is the biggest
redistribution of wealth from the middle class and the poor to the rich ever."
"Who owns assets—the rich, the
billionaires. You think Warren Buffett hates this stuff? You think I hate this
stuff? I had a very good day yesterday."
Druckenmiller, whose net worth is estimated at
more than $2 billion, said that the implication of the Fed's policy is that the
rich will spend their wealth and create jobs—essentially betting on
"trickle-down economics."
"I mean, maybe this trickle-down monetary
policy that gives money to billionaires and hopefully we go spend it is going
to work," he said. "But it hasn't worked for five years."
And
Donald Trump said essentially the same thing when he made the following
statement on CNBC about quantitative
easing...
"People like me will benefit from
this."
The
American people are still being told that quantitative easing is "economic
stimulus" which will make the lives of average Americans better.
That
is a flat out lie and the folks over at the Federal Reserve know this.
In
fact, a very interesting study conducted
for the Bank of England shows that quantitative easing actually increases the
gap between the wealthy and the poor...
It said that the Bank of England’s policies of
quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.
Specifically, it said that its QE program had
boosted the value of stocks and bonds by 26 percent, or about $970 billion. It
said that about 40 percent of those gains went to the richest 5 percent of
British households.
Many said the BOE's easing added to social
anger and unrest. Dhaval Joshi, of BCA Research wrote that “QE cash ends
up overwhelmingly in profits, thereby exacerbating already extreme income inequality
and the consequent social tensions that arise from it."
And
this is exactly what has happened in the United States as well.
And
who owns stocks?
The
wealthy do. In fact, 82
percent of all individually held stocks are owned
by the wealthiest 5 percent of all Americans.
Meanwhile,
things have continued to get even tougher for ordinary Americans.
While
Obama has been in the White House, the percentage of working age Americans with
a job has declined from 60.6% to 58.3%,
median household income has declined for five years in a row,
and poverty has been absolutely exploding.
But
the fact that it has been very good for Wall Street while doing essentially
nothing for ordinary Americans is not the biggest problem with quantitative
easing.
The
biggest problem with quantitative easing is that it is destroying worldwide
faith in the U.S. dollar and in the U.S. financial system.
In
recent years, the Federal Reserve has started to behave like the Weimar Republic.
Just check out the chart below...
The
rest of the world is watching the Fed go crazy, and they are beginning to
openly wonder why they should continue to use the U.S. dollar as the de facto
reserve currency of the planet.
Right
now, most global trade involves the use of U.S. dollars. In fact, far
more U.S. dollars are actually used outside of the United States than are used
inside the country. This creates a tremendous demand for U.S. dollars
around the planet, and it keeps the value of the U.S. dollar at a level that is
far higher than it otherwise would be.
If
the rest of the world decides to start moving away from the U.S. dollar (and this is already
starting to happen), then the demand for the U.S. dollar will fall
and we will not be able to import oil from the Middle East and cheap plastic
trinkets from China so inexpensively anymore.
In
addition, major exporting nations such as China and Saudi Arabia end up with
giant piles of U.S. dollars due to their trading activities. Instead of
just sitting on all of that cash, they tend to reinvest much of it back into
U.S. Treasury securities. This increases demand for U.S. debt and drives
down interest rates.
If
the Federal Reserve continues to wildly create money out of thin air with no
end in sight, the rest of the world may decide to stop lending us trillions of
dollars at ultra-low interest rates.
When
we get to that point, it is going to be absolutely disastrous for the U.S.
economy and the U.S. financial system. If you doubt this, just readthis article.
The
only way that the game can continue is for the rest of the world to continue to
be irrational and to continue to ignore the reckless behavior of the Federal
Reserve.
We
desperately need the rest of the planet "to ignore the man behind the
curtain". We desperately need them to keep using our dollars that
are rapidly being devalued and to keep loaning us money at rates that are far
below the real rate of inflation.
If
the rest of the globe starts behaving rationally at some point, and they
eventually will, then the game will be over.
Let
us hope and pray that we still have a bit more time until that happens.
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