[5]
Image via Max Keiser [6]
We predicted last week [7] that Bernanke would launch QE3 this week.
Today, the Fed announced that it will buy $40 billion dollars of mortgage-backed securities per month [8] ... indefinitely.
This is just another bailout for the big banks [9]. (If the government had instead given money directly to the consumer, we would be out of this economic slump by now [10]).
Bernanke claims that the main justification for QE3 is to boost employment. This is slightly ironic, since Bernanke's policies are largely responsible for creating high unemployment in the first place [11].
The real justification is to try to artificially prop up asset prices [12]. But that approach has been proven [13] to be an absolute failure [14].
This is in addition to numerous other easing programs. As CNBC notes [8]:
In addition, the Fed said it will continue its program of selling shorter-dated government debt and buying longer-term securities, a mechanism known as Operation Twist. It also will continue its policy of reinvesting principal payments from agency debt and mortgage-backed securities back into mortgages.
***
“These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” the Fed statement said.
And the Fed isn’t stopping there [8]:
“There’s strong hints that they’ll do Treasurys next,” Joe LaVorgna, chief economist at Deutsche Bank Advisors, said in a phone interview from London. “They’re pulling out all the stops to try to get this economy to gain some traction and, most important, to get unemployment down.”
This sounds nice … except that the experts say [7] that quantitative easing destroys the economy and – despite the initial optics of it – hurts the little guy.
As we said in 2008: welcome to the Fed’s Weekend at Bernie’s [15].
P.S. Yes … if you’re a homeowner, you will probably want to re-fi.