part 3 of 5
QE 3
Bernanke is in the last chapter of his chairmanship of the Federal Reserve
Eric LaMont Gregory
The Federal Reserve Chairman Bernanke stated recently that there would be QE2, but not a QE3. This statement suggests that the current round of Quantative Easing, inflating the money supply, is round one and that a potential and additional increase in the money supply by some 2.3 trillion dollars would be round two.
In fact, QE1, round one of the Federal Reserve strategy of Quantative Easing, existed from 2001 to 2006 and created the cheap money that sparked the malinvestment in real estate that landed us in the circumstances we are in now.
Between 2001 and 2006 the Federal Reserve greatly increased the US money supply. Most of the money went into residential
and commercial real estate, triggering the biggest boom-bust cycle in history.
$6 trillion dollars flowed into housing in the form of mortgage debt in the boom.
The bust, our current economy, is the process of getting rid of the overproduction in housing and debt created by the Fed's 2001 - 2006 policy of monetary inflation.
The mistake by the Fed and two successive governments was to transfer the private debt created by the bust to public debt with borrowed money. Money which the Fed is responsible for creating and now suggests that printing even more debt and interest-laden money will solve.
Bernanke is in the last chapter of his chairmanship of the Federal Reserve, increasing the money supply to jump start the economy is not working. And, it is inevitable that interest rates will have to rise along with inflation and continued high rates of unemployment and underemployment.
The new chairman of the Fed, Bernanke's replacement, will be the one to make the dramatic announcement to the American People that interest rates have to rise, and inflation tolerated.
Ultimately, when the Congress resumes its Constitutional role of maintaining the economy of the United States, we the American people will devise a economic and monetary policy that will drive real wages higher, supporting the consumer sector.
Remembering that it is the interest of the working man with which Congress ought to be concerned. When the American people work, save and invest; America prospers.
Quantitative Easing (QE) provides the Federal Reserve with the appearance of taking bold action to save the economy, and to ward off its, albetit them few, Congressional critics. Quantitative Easing, however, it is not a substitute for the harder choices governments must make.
When the newly elected boldly conservative Congressmen and women resume their Constitutional responsibility to manage the economy and money supply of the United States, they will pass the Legal Tender Act of 2011.
Thus, bringing in a sound currency, the United States Note.
Having introduced a sound currency into circulation, while withdrawing the debt-laden and interest bearing Federal Reserve Note, and doing the things that they promised the American people they would do when they were elected as bold conservatives, such as, lightening the tax burden, and 'the common sense initiative' of removing government barriers to doing business, we will have in place the ingredients for a thriving America.
When Congress paves the way for restructuring the malinvestments on the books of regional and local banks by extending the debt from short-term to long-term obligations, say 20 years, and with the introduction of a sound currency the restructured debt would progressively rise to par value.
And importantly, regional and local banks, the ones that were not bailed out, the ones that are increasingly being taken over by bigger banks, would not have to take a writedown on all of their malinvestments in real estate.
Recovery begins with the introduction of a strong and stable currency in the United States, the United States Note.
QE 3
Bernanke is in the last chapter of his chairmanship of the Federal Reserve
Eric LaMont Gregory
