Friday, November 5, 2010

Backlash Builds Against “QE2”

Feds To Pump Another $600 Billion Into Economy

Related Article, Financial Times November 5th, 2009

The Fed’s decision yesterday to pump another $600 Billion dollars into the US Economy has sparked concerns world-wide about a U.S. initiated trade and currency war.

Countries such as China, Brazil and Germany yesterday openly criticized the Fed’s actions and are now preparing to defend their currencies against a currency war, or a “race to the bottom” to devalue currencies to protect their economies.

Make no mistake about it, a currency and trade war is about the last thing our economy needs right now.  Bernanke must be nuts in his approach to appease the stock markets in an attempt to break the current deflationary cycle.

Bernanke is in uncharted waters here, doing something that’s never been done before. The risks here to our economy include hyper-inflation in commodity and food prices, which we’re already experiencing and a flight of capital out of the United States which means even slower job creation – something which we desperately need here in the United States.

If you’ve been paying attention to Oil and Food prices, you’d have noticed that Oil hit a six month high yesterday just above $86/barrel and core food prices have gone up 15% or more across the country.  This type of inflation doesn’t bode well for the future of our economy, and those most likely to be hurt the most are going to be the working poor (the very people Obama purports to “help”) and those already caught in a credit squeeze due to falling home prices and being underwater in their current mortgages.

The Fed has “doubled down” on an approach that’s already proven not to work in QE-1 (Quantative Easing) and there’s little doubt that this approach is going to lead to a longer term economic disaster for the U.S.

Sure, the stock markets may be happy now with their ‘quarter to quarter’ mindset, but the damage that’s being done here and the debt we’re incurring is going to take decades to fix.

Forget the “lost decade” we may be talking about the “lost century” and the collapse of the U.S. Economic system.

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