When the Federal Reserve created trillions of dollars of new credit out of nothing, supposedly to save us from the financial crisis, we were assured that the wise men on the Federal Reserve board would somehow remove all of those newly printed dollars from the economy in time to avert a new round of inflation. Well, Jack Wakeland sent me a link to the latest economic news, with this note:
"The Open Market Committee has just completed the final stage of the Fed's plan to dramatically increase the monetary base. They have just completed the purchase of $1.25 trillion in mortgage backed securities (an inflationary project the Fed began early in 2009) and have just completed their recent plan to purchase $0.18 trillion in additional government debt. The Fed's balance sheet stands at an all-time high of $2,290 billion, a 160% increase from levels before the Crash of '08.
"Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers issued a joint statement. It is a glum economic forecast: 3% real GDP growth for 2010. Dollar-for-dollar, this amount of growth is less than the approximately $600 billion in federal 'stimulus' spending slated for FY 2010 ($600 billion comes to approx. 4% of forecast FY2010 GDP).
"In this realistic assessement of just how deep this recession is, the joint statement from the three officials states, 'We do not expect further declines in unemployment this year.' The unemployment rate will remain near the current level of 9.7% for the next 9 months. This is the number one political reason why the ruling Democrats are not questioning Ben Bernanke's inflation plan. The Fed will maintain what Bloomberg News characterizes as "$1.2 trillion in excess bank reserves" in circulation. There are no plans right now for the Federal Open Market Committee to begin buying back all these Federal Reserve Notes (with some of the approximately $0.95 trillion in Federal debt or the approximately $1.05 trillion in mortgage-backed securities they hold).
"This forecast is consistent with the statement of the Fed's Open Market Committee:
Economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period....
Investment in nonresidential structures is declining, housing starts have been flat a depressed level, and employers remain reluctant to add to payrolls.
"Expect stagflation to 'officially' begin some time in the next 12 months."
"Fed Pledges to Keep Rate Low for 'Extended Period'," Craig Torres and Scott Lanman, Bloomberg News, March 16
Federal Reserve officials repeated their pledge to keep the main interest rate near zero for an "extended period" and confirmed that emergency measures to prop up the housing market will end as planned this month.
While the economy has "continued to strengthen," policy makers noted that "housing starts have been flat at depressed levels" and "employers remain reluctant to add to payrolls."…
Thomas Hoenig, president of the Kansas City Fed, dissented for the second straight meeting and said "that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability," the statement said.
Robert Tracinski writes daily commentary at TIADaily.com. He is the editor of "The Intellectual Activist (TIA)" and contributor to "The Freedom Fighter's Journal."
"The Open Market Committee has just completed the final stage of the Fed's plan to dramatically increase the monetary base. They have just completed the purchase of $1.25 trillion in mortgage backed securities (an inflationary project the Fed began early in 2009) and have just completed their recent plan to purchase $0.18 trillion in additional government debt. The Fed's balance sheet stands at an all-time high of $2,290 billion, a 160% increase from levels before the Crash of '08.
"Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers issued a joint statement. It is a glum economic forecast: 3% real GDP growth for 2010. Dollar-for-dollar, this amount of growth is less than the approximately $600 billion in federal 'stimulus' spending slated for FY 2010 ($600 billion comes to approx. 4% of forecast FY2010 GDP).
"In this realistic assessement of just how deep this recession is, the joint statement from the three officials states, 'We do not expect further declines in unemployment this year.' The unemployment rate will remain near the current level of 9.7% for the next 9 months. This is the number one political reason why the ruling Democrats are not questioning Ben Bernanke's inflation plan. The Fed will maintain what Bloomberg News characterizes as "$1.2 trillion in excess bank reserves" in circulation. There are no plans right now for the Federal Open Market Committee to begin buying back all these Federal Reserve Notes (with some of the approximately $0.95 trillion in Federal debt or the approximately $1.05 trillion in mortgage-backed securities they hold).
"This forecast is consistent with the statement of the Fed's Open Market Committee:
Economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period....
Investment in nonresidential structures is declining, housing starts have been flat a depressed level, and employers remain reluctant to add to payrolls.
"Expect stagflation to 'officially' begin some time in the next 12 months."
"Fed Pledges to Keep Rate Low for 'Extended Period'," Craig Torres and Scott Lanman, Bloomberg News, March 16
Federal Reserve officials repeated their pledge to keep the main interest rate near zero for an "extended period" and confirmed that emergency measures to prop up the housing market will end as planned this month.
While the economy has "continued to strengthen," policy makers noted that "housing starts have been flat at depressed levels" and "employers remain reluctant to add to payrolls."…
Thomas Hoenig, president of the Kansas City Fed, dissented for the second straight meeting and said "that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability," the statement said.
Robert Tracinski writes daily commentary at TIADaily.com. He is the editor of "The Intellectual Activist (TIA)" and contributor to "The Freedom Fighter's Journal."
0 comments:
Post a Comment