To make it easier, I've highlighted certain portions of this post so you can see that the Federal Reserve's actions have been to benefit the wealthy - not the working class. They do claim unemployment is down, but that's an out and out lie. The post I made a few days ago claims just the opposite - that unemployment is still rising, which from the observations of any reasonable person, is the truth. No matter what the Federal Reserve says, unemployment is up and is not likely to come down in the near future. - Dan.
QE2 worked, but what should Bernanke do next?
Observers worry that when the Fed stops spending it will bring recovery to a halt.
By MATTHEW CRAFT
The Associated Press
NEW YORK — Nearly everything is going according to the plan Federal Reserve Chairman Ben Bernanke hatched six months ago.
During a speech in Jackson Hole, Wyoming, on Aug. 27, Bernanke outlined an effort to spur economic growth, prevent prices from falling and push markets higher through the purchase of government bonds. Since then stocks have soared (benefits the wealthy), the unemployment rate has dropped (lie) and Americans have started to spend more.
"It's been a success," says Bill Gross, who manages the world's largest mutual fund at Pimco. Gross had skewered Bernanke's attempt to boost the economy, comparing it to a Ponzi scheme. "It's hard to dispute that since Jackson Hole the market is up around 25 percent."
(benefits the wealthy)
But the Fed's $600 billion program to buy Treasurys ends in June. And Gross and other investors are concerned the stock and bond markets will fall without the Fed's $75 billion monthly injection. "At the end of June, the biggest bond buyer steps away," he says. "The markets could have a shock in store."
Now there's a different economic issue. Higher prices for food and energy have replaced a double-dip recession as a major concern for economists and investors. In the first of two days of Congressional testimony Tuesday, Bernanke took heat from Senate Banking Committee members who argued that the bond-buying program known as quantitative easing is to blame.
The Fed chief blamed the recent jump in commodity prices on droughts and severe weather that have cut supplies at the same time China's appetite has grown. (lie) Bernanke assured Senators he would quickly tighten lending before inflation posed a threat. He said the U.S. economy still needed the Fed's support. (lie)
On the surface, Bernanke's speech in Jackson Hole was full of Fed-speak. But the language was clear to those in the audience at the Fed's annual Board of Governors meeting in the Wyoming resort. "He was saying, 'Whatever it takes we're going to do,'" says Richard Hoey, chief economist at BNY Mellon. "It was a Rambo message."
The move, which began in November, was unorthodox, but the logic was simple: Buying $600 billion in Treasurys would make borrowing cheaper and move investors out of low-yielding bonds into riskier investments like stocks. A rising stock market could then give Americans confidence in the economy and spur consumer spending, which leads to higher corporate profits. (benefits the wealthy)
A lot has happened in the markets and the economy since then — most of it good.
• The unemployment rate dropped to 9 percent in January, the most recent month for which data is available. It was 9.6 percent in August. (lie - unemployment is down temporarily because of the hiring of tax preparers and inventory takers - all seasonal jobs)
• The Consumer Price Index rose 0.4 percent in January and 1.6 percent over the previous year. Prices rose 0.2 percent last August from the month before and just 1.1 percent over the previous year. (benefits the wealthy - personally I prefer prices lower - don't you)
• The Standard & Poor's 500 stock index is up 27 percent since Aug. 26, the day before Bernanke's speech, powered by stronger corporate profits and people moving their savings into stock funds. (benefits the wealthy)
• Consumer spending has climbed seven months in a row. In the last quarter of 2010, it grew at the fastest pace in three years. Spending rose 0.2 percent in January, according to data released Monday.
"Measured in the fairest possible way, and by just about every measure, QE2 has succeeded so far," says Anthony Chan, chief economist at JPMorgan's wealth management unit. QE2 is market slang for the Fed's quantitative easing program.
Long-term interest rates are the exception. They've been on a steady climb, until the recent turmoil in Egypt and Libya pulled them lower. ( lie - Libya and Egypt are but two oil producing countries - a lack of oil from them couldn't possibly account for a 70 cent per gallon price increase - with further raises to come - the Judeo-Capitalist are just using this as an excuse to extort more money from us) The benchmark 10-year Treasury rate recently hit 3.50 percent. That's up from 2.49 percent on Aug. 26. But rates fell after the Jackson Hole speech and then began rising on each bit of good news about the economy. Economists say that's how it's supposed to work. Interest rates typically rise during an economic recovery to compensate bond holders for the negative hit from inflation. (benefits the wealthy)
"When this stuff starts to work, interest rates go up," Chan says. "Otherwise, it's just not working."
It's another story if rates jump too quickly. "Obviously, higher rates can stop an economy dead in its tracks," he says.
How could rising rates derail the Fed's efforts? A common worry among investors is that the Fed proves too successful in pushing up prices and inflation gets out of control, leading to a spike in rates. (possibly)
A similar but separate concern, Hoey says, is that people come to expect rampant inflation and begin preparing for it. Companies raise prices in anticipation. Investors ditch bonds en masse, interest rates jump and borrowing turns suddenly expensive. (Another lie to benefit the wealthy businessmen)
"It has brought us closer to an unstable rise of inflation expectations," he says. "There's a risk of exceptional instability."
Another danger: There will be nobody to replace the Fed when the program ends in June. "Who will buy when the fed stops buying?" Gross asks, rhetorically. "Who will take their place? Mutual funds like Pimco?"
That's unlikely, he says, because investors have been pulling money out of bond funds. Other institutional investors, like insurances companies and banks, are beginning to put their money elsewhere. And even bond managers like Gross have been warning investors away from Treasurys for months. If rates rise too high and too quickly, they squelch the economic recovery and drive down stocks.
Jack Albin, chief investment officer at Harris Private Bank, worries that the U.S. could wind up with a similar experience to Japan's. The Japanese central bank also managed to boost prices and spur economic growth through pushing money into financial markets starting in 2001. Bond yields began rising. But the benefits evaporated when the central bank pulled back.
"Maybe it was a problem of timing," he says. "But once they took the quantitative easing programs off, the economy just sagged back to where it was before."
Copyright 2011 The Associated Press.
Comment:
Like I said, all these benefits go to the wealthy. We, the workers get nothing - as usual. This is a perfect example of why this rotten, corrupt, filthy system of financial slavery must be replaced by one that puts the interests of the workers, most especially the White Workers first. That system is National Socialism. 'Nuff said.
Dan 88!
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