According to Lowell Ponte, the Federal Reserve Chairman Ben Bernanke may have handed President Obama the steering wheel, accelerator and brake to our economy. Earlier this week the Fed expanded their stimulus and intends to pump at least $85 billion each month into the economy.
By Lowell Ponte
Thursday, 13 Dec 2012 11:21 AM
Federal Reserve Chairman Ben Bernanke may this week have handed President Obama the steering wheel, accelerator and brake of our economy.
The expanded stimulus announced by the Fed on Tuesday pushed the stock market up by a meager 81 points, all of which evaporated an hour later while Mr. Bernanke answered press questions.
Clearly the fabled Fed "Bazooka" of stimulus has become a mere pop gun — unable to rescue our wallowing economy, yet now required to prevent it from falling asleep.
The Fed announced that it now intends to pump at least $85 billion each month into the economy until the unemployment rate falls to 6.5 percent or inflation crests 2.5 percent — an open-ended program to keep the addictive drug of stimulus cash, printed out of thin air, flowing into our easy-money junkie economy.
The Fed intends to hold interest rates near zero until 2015 or beyond, a policy that economists call "financial repression" because it means that banks will pay savers less than the rate of inflation.
Savers will continue to lose money by having bank accounts, and will feel pressure to move their money into riskier investments.
Corporations will continue to hold as much as $3 trillion on their books rather than spend it on expansion or hiring. As Bernanke acknowledged, both consumer and business confidence are sinking sharply.
Americans may get a lump of coal in their Christmas stockings for the next four years, along with a bill for President Barack Obama's pending carbon tax.
Bernanke told reporters that the Fed has been, and will continue, buying up the "safe" investment of government bonds — with the Fed, according to recent reports, now the buyer of 90 percent of U.S. debt.
Bernanke said that the Fed gobbling up $4 trillion in U.S. government paper did not constitute "monetizing the debt," because the Fed will not hold this debt permanently.
The grim reality is that by continuing to cover government borrowing and spending with $1 trillion each year conjured from nowhere, the Fed inevitably will generate huge inflationary pressures on the dollar.
To ease such pressure, the government can massively raise taxes, as President Obama demands, thereby clawing back excessive money the Fed is flooding into the economy.
Obama via Keynesian redistribution aims to transfer this cheap money to the poor, who will purportedly multiply its stimulative power by quickly buying products.
Obama will then impose huge additional taxes on producers to claw this money back, who in turn will pass these taxes to the poor in higher product prices.
President Obama will then blame "greedy capitalists" for raising prices on the poor, who will be given ever-higher welfare benefits (again with money borrowed or conjured) to cover the ever-rising cost of living . . . and to make them ever-more dependent on the Big Government political party.
Welcome to today's Potemkin economy.
The announcement (with qualifiers) that stimulus will continue at $85 billion per month until unemployment falls to 6.5 percent is a huge change in Fed policy, which used to set a beginning and end date for its measures, not an end date based on factors such as unemployment that are out of its control.
The official unemployment numbers, however, can be influenced by President Obama and his appointees to the Bureau of Labor Statistics (BLS).
Controversy erupted weeks prior to the November 2012 election when the BLS announced an unexpected plunge in the unemployment rate from 8.1 to 7.8 percent — the first drop below 8 percent unemployment during Mr. Obama's entire time as President, and the biggest monthly drop in 29 years.
The last such one-month drop in unemployment happened during President Ronald Reagan's Administration, when the economy was growing at more than 5 percent.
This politically-convenient giant drop in Obama unemployment happened when the economy was falling and showed a growth of only 1.3 percent.
If the Obama Administration and its political appointees are willing and able to massage official unemployment numbers, then Mr. Obama now can control the Fed merely by setting this hard-to-verify number above or below 6.5 percent unemployment.
The Fed this week, history may record, virtually handed its power to shape and regulate monetary policy to President Obama.
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