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As Predicted, Bernanke Launches QE3 to Help the Big Banks … Which Will Destroy the Economy

Washington’s Blog [1]
Sept 14, 2012

We predicted last week [2] that Bernanke would launch QE3 this week.

Today, the Fed announced that it will buy $40 billion dollars of mortgage-backed securities per month [3]indefinitely.

This is just another bailout for the big banks [4]. (If the government had instead given money directly to the consumer, we would be out of this economic slump by now [5]).

Bernanke claims that the main justification for QE3 is to boost employment.  This is slightly ironic, since Bernanke’s policies are largely responsible for creating high unemployment in the first place [6].

The real justification is to try to artificially prop up asset prices [7].  But that approach has been proven [8] to be an absolute failure [9].

This is in addition to numerous other easing programs. As CNBC notes [3]:

In addition, the Fed said it will continue its program of selling shorter-dated government debt and buying longer-term securities, a mechanism known as Operation Twist. It also will continue its policy of reinvesting principal payments from agency debt and mortgage-backed securities back into mortgages.


“These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” the Fed statement said.

And the Fed isn’t stopping there [3]:

“There’s strong hints that they’ll do Treasurys next,” Joe LaVorgna, chief economist at Deutsche Bank Advisors, said in a phone interview from London. “They’re pulling out all the stops to try to get this economy to gain some traction and, most important, to get unemployment down.”

This sounds nice … except that the experts say that quantitative easing destroys the economy and –despite widespread assumptions [10] – hurts the little guy [2].

As we said in 2008:  welcome to the Fed’s Weekend at Bernie’s [11].

P.S. Yes … if you’re a homeowner, you will probably want to re-fi.