Quantative easing and the economic cargo cult
“Still a soldier. A man of honor in a den of thieves. Well this is my gorramn den, and I don’t like the way you look down on me. I’m above you, better than! Businessman see? Roots in the community. You’re just a scavenger.” — Badger, Serenity, 2002
Follow the money. In politics these days, it’s the only thing that matters; everything else is bullshit. This week, Fed Chairman Ben Bernanke gave us another $600 billion to follow. But what does it mean?
In practical terms, it means the Fed will be dumping $76B in treasury bonds on the market for the next 3 quarters so that Goldman Sachs and the like can buy them up and show a profit on their balance sheet. The justification is, effectively, that by giving the big banks a safe place to stash their dough, they’ll be more charitable about lending to American companies, specifically small businesses. Hoped-for secondary effects include possibilities like nudging the inflation rate towards a 2% target and making exports more profitable against China’s pegged currency.
In other words? You could smash your head into a pulp trying to figure out what the fuck the fed is doing and not make any better sense of it than this, and there really isn’t a more cogent analysis possible because nobody seems to completely understand it, ergo nobody’s really talking about it except to note, in passing, that it happened.
Alternately, the move can be understood as only someone with no money and very little interest in economics might make sense of it; as a gesture of appeasement to the American plutocracy, and the last option left on the table in the wake of last week’s midterms. As direct transfers of wealth goes, it’s a relatively cheap maneuver, and with Obama’s “Pimp American Exports Tour” cranked up to 11 on his swing through Asia, there might be some benefit derived in the (not near not far but) mid-term.
The bottom line is that the TED spread has, finally, resumed normalcy after it’s outrageous spike back at the height of the recession in 2009, and the interest rate remains firmly buried at zero, which translates as the banks have no rational excuse for continuing to refuse to lend, outside of demands that we stop criticizing them for looting the treasury when the middle class was forced to bail them out of their own incompetence or risk a global financial collapse.
More directly? If you live in one of the flyover states? This is your cue to get the fuck out of dodge before the full weight of the next couple of years lands on you.