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November 3, 2010
$1 Trillion QE2 - Economic Suicide (Updated)
Topics: Political News and commentaries
$1 Trillion is the price for the Fed's next round of pump-priming - another go-around of massive monetary expansion.
As The Yid points out at the BBC, the Fed's action poses the risk of unleashing an inflationary spiral that would do far more damage than the stagnation we're experiencing now:
The effect of this kind of action is the same as if Congress was appropriating another "porkulus" it dumps cash into the economy by increasing our federal debt. This move is essentially ignoring the message the voters sent to the government yesterday, even worse, it is economic suicide.More here ...Here's the problem, by "printing" all of this extra cash our government is trying to create inflation and "spur the economy" with this move there is a real chance of creating hyperinflation. That's exactly what Germany did in the late 1920's.
And as Doug Mataconis notes, we're essentially repeating the same mistakes that got us into this mess in the first place:
The Fed is essentially creating $ 600,000,000,000 of "new money" in the hopes that it will push stock prices up, which it in turn hopes will stimulate consumer spending, which in turn it hopes increases business investment and hiring. It's a very Rube Goldberg-ian vision of how to stimulate the economy, and it seems to me to be exactly the wrong thing to do at this point. It isn't the job of the Federal Reserve to push up stock prices, or at least it shouldn't be, and an economic recovery that is based primarily upon increased financial speculation strikes me as very fragile indeed, and basically amounts to repeating the same mistakes that got us into the mess we're trying to get out of.Welcome to Weimar, America.
Posted by Richard at November 3, 2010 3:32 PM
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