Free Markets, Free People

Quantitative Easing, Round II, Approved

The Federal Reserve announced today that it would embark on a second round of “quantitative easing”, to the tune of $600 billion. This will join the previous round of $1.3 trillion over the last 18 months. For those of you who don’t know, Quantitative Easing is a monetary policy transaction, whereby the Federal Reserve buys securities from banks–usually US Treasury Notes and Bonds–with cash.   This infuses fresh cash into the monetary system. After this second round of Quantitative Easing, the Fed will have injected $1.9 TRILLION in cash into the monetary system.

Now, sadly, the Fed did not, and does not, just have $1.9 trillion in cash lying around in big vaults to take Scrooge McDuck money swims in when the mood takes them. But that’s not particularly a problem, since the Federal Reserve simply prints up the required amount of cash (or creates it electronically for funds transfers). In any event, the Fed buys the securities with money that is newly made for that purpose.

With that in mind, my advice to you is to collect all of the printed currency you can.  You will then need to package it in extremely tightly-wrapped bundles.  Yes, it is a bit troublesome to do, but you’ll find that it burns much longer and hotter that way, which works far better for either cooking or heating purposes.

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9 Responses to Quantitative Easing, Round II, Approved

  • And here we have another example of the central bankers making policy just to make the administration look good for a terrible cost to be born by the rest of us.

  • I sure hope the Fed also distributes some of whatever they’re smoking.  It might take the edge off the economic hurt that’s about to rain down on all of us.

  • Keep ’em loose, they’re good for bathroom use. Glue ’em on the wall for cheap wall paper. Lots of uses for the dollar. Man, I am glad I have a lot of Canadian dollars and Chinese Yuan for now….until they do their own printing to “catch up.”

  • What’s the point?  Is the Fed’s position that there simply aren’t enough dollars in circulation, and people can pay for things for want of currency?  Or is it simply a genuine case of throwing sh*t on the wall (or a huge mass of greenbacks) and hoping something sticks?

    Anyway, it sort of makes you wonder if the feds will decriminalize counterfeiting.

    Hello.  I’m Secretary of the Treasury Tim Geithner.  You may know me from such popular informational videos as “Turbo Tax for Dummies and Cheats”, “The Idiot’s Guide to Financial Stimulus”, and “Why Massive Debt is Good for Your Financial Health”.  I’d like to talk to you today about an important new federal program.

    In this time of financial crisis and economic uncertainty, many Americans are wondering, “What can I do to help?” Millions have helped stimulate our economy by going on – or staying on – unemployment benefits and food stamps.  Many millions more are pressing their union shop stewards to urge Congress and state legislatures to pass even more generous pay and benefits packages, as well as pass Card Check to make it easier for people to join unions in the face of corporate intimidation.  But there’s something that ALL Americans can do.

    Make their own money.

    Yes, under a new program sponsored by the Treasury, we’re inviting every American to print his own money.  You can use a color printer, a black and white photocopier, or even just write a dollar sign and a number on a piece of scrap paper, and it will be considered legal tender in the United States!  This exciting new program will allow you to instantly pay off all your debts.  But wait!  There’s more!  Using your own money, you can make purchases.  Buy a new house, a new General Motors car, a new plasma TV, or anything else, and all without the hassle of borrowing money from greedy Wall Street bankers who will expect you to pay them back with interest.  How’s THAT for stimulus we can all use!

    So, get out there and get those printers humming and those sharpies squeaking!

    Print your own money.  It’s the patriotic thing to do!

    [Announcer] This message sponsored by the United States Department of the Treasury and the Ad Council.

  • I don’t think this initial round will result in much of the intended effect. The Fed is profoundly misreading the problem. The economy needs to reduce indebtedness (ie de-leverage). All this is going to do is create more misallocation of money to commodities and foreign currencies, while reducing the value of the dollar. At the consumer level we are going to experience another round of stagflation. Stuff we need (gas and groceries) is going to get more expensive, while stuff we can do without (new houses, cars, clothes and electronics) is going to decline in price or remain stable. Net net, the government will tell us for months to come that “there is no inflation”. Lastly, if you are living on a fixed income, the value of your investments in bonds and real estate is going to decline in real terms. The “good news” if there is any, is that the banks are going to make record profits which will go a long way to repairing their precarious balance sheets.
    This is not going to increase growth. My long run concern is what will they do for an encore? More of the same?
    Related point: The Fed has a dual mission. Full employment and price stability. Full employment should be a policy of the elected government, not a mandate of an independent federal agency. Thanks, Hubert Humphrey!

  • North Korea has been printing US currency for years.

  • The Financial Times has a nice wrap up if anyone is interested:
    The, ahem, money quote …
    “Everybody wants the US economy to recover, but it does no good at all to just throw dollars from a helicopter.” … Guido Mantega