After all, death will put an end to your pain. That seems to be the sage advice coming out of the top officials at our beloved Federal Reserve.
A big Hat Tip to Adrienne at Adrienne’s Corner for her recommended reading list that included this article from The Economic Collapse blog. The article has several quotes from Bernanke and from several of Presidents of different Federal Reserve Banks that indicate that the Federal Reserve is already thinking about the need for QE III.
Are these people at the Federal Reserve so much smarter than the rest of us? Are we just too ignorant to see the benefits of printing tons and tons more funny money? Look around you and tell me if you are seeing all these benefits.
The US is currently feeling the inflationary impact of QE I along with some unexpected help from the unrest in the Middle East. We have the inflationary impact of QE II coming down the pike and should arrive before the end of this year and already the Fed is hinting that they may need to print even more funny money, QE III. Do these people know what they are doing? Here is what the author had to say:
This is essentially a gigantic Ponzi scheme, but sadly there is just not enough money in the rest of the world to be able to continue to feed the U.S. government’s voracious appetite for debt. Right now Ben Bernanke and his cohorts are trying to break the news to us gently, but anyone with half a brain can see what is happening. The only way for the game to keep going is for the Federal Reserve to print lots more money, and that is going to be incredibly bad for the U.S. economy in the long run.
Is there some logic to the Fed’s policies that I just don’t understand? It turns out that at one time what the Fed is doing did have positive benefits. In the comments section on this article, I found a link that led me to another link to an article at Nathan’s Economic Edge that may explain why the Fed is so enamoured with their printing presses. Nathan’s article is titled “THE Most Important Chart of the Century”. My first reaction to reading the title was that of a doubting Thomas. But I quickly changed my mind. This one simple chart may indeed be the “most” important chart of the century.
We have always understood that credit, in and of, itself is not necessarily bad. Most of us have benefited from the use of credit to buy homes and cars and other large price purchases. We have known that as long as we can comfortably pay the principle and interest payments we will be okay. The problem, of course, is when we become overextended and can’t even pay the interest quotas. We have been told by the Keynesian economist over and over again that the Federal Government is not confined by the same rules that you and I are. NOT TRUE!
Nathan’s chart is very simple. He uses the ratio of the change in GDP to the Debt. I f the ratio gives a number greater than zero, then the change in Debt had a positive affect on the GDP. You can see by the chart that in the 1960’s, adding a dollar to the Debt provided about a dollar in growth of productivity. However, continuing to add to the Debt since then has had diminishing benefit. The chart projected that the benefit would approach zero in 2015. But something strange happened in 2009.
Nathan explains this phenomenon as follows:
Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.This is the dilemma created by our top down debt backed money structure. Because all money is backed by a liability, and carries interest, it guarantees mathematically that there will be losers and that the system will eventually reach the natural limits, the ability of incomes to service debt.