Is it possible to kill quantitative-easing painlessly?
When the weather starts to get cold, people always seem to be in a reflective mood — and an apologetic one.
On Tuesday, the Wall Street Journal carried an incredible confession on its op-ed page written by Andrew Huszar, who was recruited from Wall Street to run the Fed’s quantitative-easing program.
That program, as my preceding letter to my kids makes clear, is still going strong despite the fact that Hurricane Sandy probably did more to expand demand for goods and services — and credit jobs — than QE.
Every American should read that piece because it shows just how careless and selfish those with power and money really are.
“I can only say: I’m sorry, America,” Huszar confessed. “As a former Fed official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing.
“The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest back door Wall Street bailout of all time.”
Wow! Just what I’ve been saying for years. And here you have it straight from the horse’s mouth.
Wall Street, banks, politicians — all of them wanted QE because they couldn’t handle the alternative. What was the alternative? That the US would have to live within its means for a few years and — tough as it is to say — not behave like the spoiled brat of the globe.
QE could only exist if there was a conspiracy of these powerful groups. And I know we like to dismiss any notion of the C-word, but conspiracies do exist. And the economic tricks of the past five years are a prime example.
In 2008, Fed Chairman Ben Bernanke unveiled the idea of a shadow currency to the world. And as 2014 draws near, we’re still wondering when the US economy will starting growing.
My real concern isn’t that QE is a failure. The real concern is, How the hell do we kill this monster without hurting millions of people?
Bernanke is insisting that the $4 trillion in bonds and mortgages bought through QE will eventually mature and will simply disappear from the Fed’s books. Presto, change-o — all gone.
Let’s hope.
And then there is the problem of the dollar, which has been in a long slump. If foreign investors are holding assets denominated in greenbacks like US Treasury securities, they will take big losses if the dollar continues to slump and they need to return those assets back to their own currency.
Optimists think one thing balances all those bad things: the US has the most stable government in the world. So people in places where things aren’t so predictable will always want to invest here no matter how much we screw up.
Big deal! That’s an especially meaningless argument if our government can’t cut its massive deficit, has lost control over interest rates and is playing chicken with the value of its currency.
One good thing has happened since 2008, though. America has become more energy independent, thanks mostly to new technology. We’ve found ways to capture oil that had been beyond our reach and we have technology now that allows cars to go further on a gallon of gas. And that would be awesome news if so much else wasn’t going wrong.
My suggestion: write your kids a note. Something for them to reflect on when they move to, say, Canada.