I can only say: I’m sorry, America. As a former Federal Reserve 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 backdoor Wall Street bailout of all time.
See, we just can’t come to use language in a precise manner.
Many people see “bailouts” as something you do to save someone, but which have no costs. That is, if your boat has a leak in it, you bail it out. The water goes back into the ocean or lake from which it came and that does nothing bad to anyone. There is only benefit (you don’t sink and/or drown.)
But QE, as a means of “bailing out” banks, doesn’t work this way nor does anything else. In an ocean or lake the volume of water coming into your boat first came from the ocean or lake (and thus returning it doesn’t hurt the lake, ocean or waterfront homeowner who might otherwise get flooded) and the volume involved is trivial compared to the total of said ocean or lake.
The essence of claiming something is a “bail out” is thus a crafty lie.
To call these programs by their proper name would be to invite a felony prosecution because the proper name is theft.
Andrew Huszar goes on in his oped to discuss the fact that on any objective measure QE has done exactly nothing for consumers — or “Main Street” in general. What it has done is steal from you and give those funds to big Wall Street firms — banks, mostly, allowing them to avoid the bankruptcy they richly deserved in 2008.
See, they were all broke. Literally broke. But Congress, in concert with The Fed, decided to steal your money at gunpoint and give it to them. You, believing the BS coming from Washington DC and refusing to demand honest politicians, allowed it.
Then, somewhat-quietly in 2009, Kanjorski codified that theft into mark-to-fantasy “valuations” for said securities, which is much like someone spending all the money then claiming that their checks are still good — because they have been given the legal ability to avoid having to actually clear them with good funds! Just sit on that check for a while until the price is something you like, said Congress.
Pick your self-delusion — whether you believe that Obamacare would “fix things” for you (how’s that working out?) that voting for McCain would stop it (after he, as a single individual, took the government’s guns and used them to rob you in the form of TARP to initiate the theft), that Mittens would fix it (after he has a history of playing the same leverage and insider games that the rest of Congress and others have played continually for 30+ years) or that a third party (the Libertarians) running a man for President who was fundamentally dishonest about finance and banking yet he claimed he’d submit a balanced budget (and which led to my quitting same party in disgust.) The latter party, incidentally, now has taken one of the architects of that disaster (hi Adrian) who demonstrated to my satisfaction his own contempt for political speech in the form of the First Amendment and has him running for governor here in Florida — and some of the fools who refused to walk away then are today sporting his business cards and bumper stickers rather than turning up their noses in disgust. Got a barf-bag handy?
Andrew, however, proceeds from a false position with his missive as well. I can somewhat excuse that, I suppose, as 30+ years of stupidity will dull anyone’s mind. But lest you think that his “apology” is just one of a jester, read this:
It wasn’t long before my old doubts resurfaced. Despite the Fed’s rhetoric, my program wasn’t helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn’t getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash.
Hammer this into your head folks: Credit will never, ever substitute for actual economic output because it cannot. At it’s best credit is just a time-shift. That is, it allows you eat a hamburger today and pay for it next Tuesday.
At worst it is an instrument of theft because if the credit is not paid down and thus removed from the system it destroys purchasing power on a dollar-for-dollar basis — it mathematically must do so — and thus screws not only everyone else but the person who takes it out as well since nobody ever lends for free.
In other words credit that does not self-liquidate is a shotgun that you place in your own mouth — and you then tickle the trigger with your big toe while praying that your foot dexterity sucks.
Nobody in the political sphere who does not (1) understand this and (2) preach it and formulate their entire economic policy around it deserves support. Ever. Period. If you fall for, support, help or in any way or give aid and comfort to such a politician you are slitting your own throat.
We’re about to blow our own brains out (again) and as all of this is going on all you have to do is look at the patterns in the market and you see all of the indications of a massive 1999-style bubble but worse. Many wish to look at P/E and similar statistics and say “oh but that’s not so bad” but the “E” part is goosed through these programs as well and because it is not output based but rather by stealing from you the underlying premise is false.
Price is truth and the compressing nature of the moves and retraces tells you that the asymptote is approaching in the near future, putting us in the danger zone of imminent failure.
Timing exactly when it will come is a fool’s game but denying the inevitability of that outcome and remaining exposed to it is suicidal. The worse news is that when the inevitable comes the entirety of the ramp will come back off with interest and this time there is nothing left with which to counteract the effects.
The Fed isn’t thinking “independently” from Wall Street or otherwise. It is in fact an arm of a monstrous web of lies built on the false premise thatCongress runs on a daily basis from both left and right sides of the aisle. And make no mistake, even the acolytes of people like Ron Paul are deluded beyond reason.
Ron Paul needed only ask one or two coherent questions during the semi-annual testimony to instantly destroy the credibility of The Fed’s programsand force their cessation.
He didn’t do so, instead rambling on about gold and consuming his time with nonsense that amounted to nothing more than masturbatory fantasy. So much for the messiah.
If you take from the above that it’s all a vast web of lies, you’re learning. But the important warning I bet you’re about to ignore is that a few people who were architects of the financial grenade you swallowed are now publishing pieces trying to buy their way out of Hell knowing they will be standing before St. Peter on an imminent basis.
Take from that what you will.