QE3; And The Endgame.
Firstly, there is no QE3. Not in the sense of some sort of continuity of program. Its not a sequel, its a completely different animal.
In scope, "QE3" Differs from its predecessors in that its open ended. The fed plans to buy MBS's PAST the time that the "economy turns around". Additionally we're talking about WAY more "printing". QE2 was supposed to be 600 billion a year, this is over a trillion in the first year alone. AND, this is important. Its open ended, unlike previous QE periods. This is particularly significant in terms of what it suggests to foreign investors (China). Open ended printing "until its fixed, never mind that it hasn't fixed it the last two times". Has a great deal of historical precedent, all of them leading to economic disaster and default.
Secondly, I have heard nobody translate what the Federal Reserve said on announcement of QE3. This is particularly important for working (and non-working) class citizens. The federal reserve has promised to continue to buy Mortgage Backed Securities, and is expected to buy treasuries "through the point that the unemployment situation improves".
What I haven't heard anybody mention at all is how bankers, and the world's elite power-brokers hear this;
"For every month employment doesn't improve, for every month the economy doesn't improve, were going to take your mortgage assets and give you 85 billion dollars." Does this incentivise the production of deravitives, or efforts to improve the economy?
Do I have to point out that this is hardly an incentive to the wealthy of the nation to see the economy improve? The way this works is the banks have a bunch of bad mortgages, bundled and used as securities. The Kenysian economists, and the federal reserve believe (wrongly, but lets entertain the notion they're right) that the Fed will buy these assets, and give the banks freshly "printed" money. The banks in turn in this scenario will loan this money out (at historically low interest rates), flood the economy with money, and this will supposedly "jump start" the economy.
Now, would you, if you were told; "If the economy fails again this month, we'll send you 85 billion again next month", loan that money out into a contracting economy with historically low interest rates, or would you invest it. Say overseas, or in the stock market? Would you risk that money on small business loans, or would you say..Start buying commodities futures in the face of a devalued dollar, leading to increases in things like gasoline and food?
Let that sink in. The Federal Reserve just offered a payment plan to the worlds elite to keep the US citizen as poor and unemployed as possible. This is not an accident. More on this later.
Thirdly; As I mentioned, this isn't a replay of QE2. The Fed is buying Mortgage Backed Securities instead of treasury bonds. We should remember that the MBS market played an enormous role in the crash of '08. They called it the housing bubble, but what caused the collapse was overvalued Mortgage Backed Securites suddenly losing their value, and the soundness of the banking system being reliant on that market.
This is essential to understand for the future. Even if QE3 works, its still a disaster. Lets say you make fans. One day a major player with infinite money comes into the market and says; "We are going to begin buying fans, and will keep buying fans until we own 33% of the market share of all fans. Obviously this is going to create huge incentive to create fans. And obviously this is going to create a lot of incentive to crank out fans as fast as possible. It incentivises the producers of fans, NOT to start making good quality, investment sound fans, but instead ANY fan that they can justify selling to a giant market player that is looking for any fan that it can justify buying. Because the fed has to come up with 45 billion a month of Mortgage Backed Securities to buy. While still leaving enough of them in the rest of the market in order to maintain the markets legitimacy. Obviously the Fed can't own 100% of the mortgages in the country.
One only has to look back on the mortgage crisis to see what this is going to do. Rather than allowing the mortgage crisis to correct, (something it still hasn't done), rather than draining the toxic assets out of the economy, the FED has just said "GAME ON". No more worrying about creating Mortgage Backed Securities, the FED will buy them. Lots of them. And don't think the people creating these things aren't aware of the subtext. "And if it doesn't work, we'll buy MORE, FASTER". Which is exactly what bloggers like Paul Krugman are calling for. The Fed owning an even larger share of the mortgage market than 33%!
Also, in the Fed Chair's speech, he made it clear that the goal of QE3 was to drive interest rates even lower than the .25% that they are now. "to encourage lending" By which he means mortgages. Forget for a second that the Government is approaching paying you to take money. It should be obvious by now that what the Federal reserve is doing is trying to re-inflate the Mortgage Backed Securities bubble that led to this economic crisis in the first place. Which is the OPPOSITE of what should be happening. The economy will not improve until the bubble is allowed to unwind entirely. You can blow air into a balloon that has a hole in it, and it might puff up a little, but it will never "inflate". Ironic Pun intended.
What the Federal reserve is doing (again) is liquidating the wealth of the nation, and giving it to their buddies, at the expense of the US people. The bankers will continue to take the essentially free money, and invest overseas, or in the stock market, or do pretty much anything except lend to the common person. The dollar will continue to devalue, hiding its weakness behind the collapsing Euro and the Japanese economy. And eventually after the Fed has bought 33-50% of the market share of MSB's and treasuries, the bond holders will call bullshit.
When that happens, there will be no escape for the American people. Keep in mind that currently the US government spends about 6% of its budget on interest on its debt. Interest rates are at .25%. This means that if interest rates go up to a mere .75% Were looking at 18% of the budget, all other things being equal, going to interest. If interest rates were to climb to a mere 2%, this would bring the interest payments as a percent of budget to 48%! Think about what that means to spending in other arenas. Heres a hint; They aren't going to slash worldwide military spending in the runup to a massive default on their debts....
The government will claim that the fed is a private institution and repudiate the debt, but the FED knows that Social Security is backed by treasuries, as well as the pensions of millions of Americans, including most importantly the same government employees. We will be forced to accept the trillions in debt that are the result of banker gambling as our own. That little statistic where they calculate "your share" of the debt will take on very real meaning.
Once unemployment has remained sufficiently high, and people are sufficiently broke from a second and inevitable collapse, the low paying jobs will begin to come in. (As is already happening if you scrutinize the job figures from our so-called recovery). Factory jobs. Part-time jobs, etc. At new, historically low wages. And you'll be thankful.
Look at trends on college graduates as more and more of them are 10's of thousands of dollars in debt, and are working low-pay menial jobs to pay them off. These people '"owe their soul to the company store" Which in the case of student loans, which can never be defaulted on, is Uncle Sam. Wage slavery is the Future of America, either through student loans, a requirement of the job, or through your mortgage, or through the aggrigate effect of both on the economy in general. Sorry.
The bottom line is that what remains of US industry (everything that absolutely can't be outsourced to the new empire) has to compete with places like China. The economy is being engineered through crisis in a global "race-to-the-bottom". And YOUR politicians and oligarchs are going to do their best to make sure you "win" it.
Watch what happens in Europe, assuming they go first.