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Nice little article about QE3.

I'll take the pre-election benefits of this, but it has got to end now.  They are burying the american middle class (and I mean burying - like dead and gone you'll never see it again) with these policies.

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Comment Preferences

  •  It means the rich get to dump their bad debts (6+ / 0-)

    and the poor get to pay for it all. Economics 101.

    Hope has a hole in it when Republicans come, bringing shackles and sorrow; branding their greed on the backs of the poor. - Wendy Connors

    by Wendys Wink on Sun Sep 16, 2012 at 05:05:43 AM PDT

  •  That the bubble is so important (3+ / 0-)
    Recommended by:
    Gooserock, Deward Hastings, corvo

    to the Treasury that keeping the economy broken to maintain it will be done.

    Education is a progressive discovery of our own ignorance.

    by Horace Boothroyd III on Sun Sep 16, 2012 at 05:07:35 AM PDT

  •  QE3 has the Fed buying MBS (2+ / 0-)
    Recommended by:
    martybee, gramofsam1

    in large quantities. So there are several effects:
    - Mortgage yields decline. This is good for homeowners as the article points out (it makes home prices increase). It is also good for people who are refinancing or buying a home as the mortgage rate will be lower.
    - Treasury yields increase (a wee bit).
    - Inflation is given an upward pressure. They are in essence printing $40B a month in order to buy the MBS, so the policy is inflationary. This is beneficial to everyone (including the US Treasury) who owes on debt.
    - Banks get an injection of capital. Banks own most of the MBS out there, so when prices went up last week (by less than 1/2 of 1%), the banks that own the bonds made some money.
    - Theoretically, it creates jobs as it spurs real estate investment activity.

    I agree with the article where it says that this policy is not going to do much for the economy; with interest rates already low (and short rates at zero), there's not much the Fed can do. But I disagree that this policy is good for the rich and bad for the middle class - it's just not that simple. And I disagree that this is a dangerous policy in that it represents a return to the hyper-liquidity days that led to the bubble. This is a very minor stimulus of the sector compared to the effect of the non-agency securitization market, the CDO market, re-REMICs, and lower bank capital rules that caused the bubble.

    •  But if house prices increase then (0+ / 0-)

      lower mortgage rates might not make any difference. In fact it might make matters worse. When the bubble was being built people who could not afford certain homes because they could not make monthly payments, or did not have enough money for the down payment, were offered special mortgages that, in effect, lowered their payments. But eventually the pipler had to be paid.

      Also rising home prices make it more difficult to sell a home. Also rising home prices result in a lockup of equity that will be available through loans, so the homeowner will suddenly be saddled with a second payment.

      Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

      by hestal on Sun Sep 16, 2012 at 05:48:00 AM PDT

      [ Parent ]

      •  Factually, rising home prices (2+ / 0-)
        Recommended by:
        jsfox, gramofsam1

        are almost always correlated with faster turn times (it is easier, not harder, to sell a home in a rising home price environment). Also, equity buildup is unequivocally good for the homeowner. I think you are saying that if one's house goes up in value, she will march right out and get a home equity loan (a second lien) and that is bad, therefore home price increases are bad. That to me is like saying that getting a raise at work is bad because then you go out and buy a better car and thus have higher car payments which is a bad thing.

        •  You missed the point. (0+ / 0-)

          Sellling a home my be easier but buying another home may not be. If the homeowner's income is not keeping pace with the rise in home prices then she will be going deeper in debt with less ability to pay that debt. Likewise with home equity loans.

          Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

          by hestal on Sun Sep 16, 2012 at 06:58:48 AM PDT

          [ Parent ]

  •  Relaxation of Quantitivity (0+ / 0-)

    Its good for your back

    Happy just to be alive

    by exlrrp on Sun Sep 16, 2012 at 05:26:03 AM PDT

  •  It's not the QE it's the purchase of MBS (5+ / 0-)

    Just as the Presidents stimulus didn't work as well as it should have because it was almost half tax cuts, this QE isn't going to work well, if at all, because it's MBS instead of treasuries combined with fiscal policy.

    Yes, this is pure trickle down with the $40B/month going to banks and hedge funds and rich investors with the hopes that they will invest in the productive economy.  They have recovered nicely since the beginning of this depression and haven't invested in jobs, why would throwing more money at them get them to do it now?

    The problem is demand, and this does VERY little to increase demand.  It shows who Bernanke really is.

    •  How can there be more demand (0+ / 0-)

      when the main problem for the average American is indebtedness combined with un or under employment, and low/stagnant/decreasing wages when fully employed?

      We are never going to be able to consume our way to a better economy when the main problem for Joe and Jane Average is debt. And the zinger is of course debt is profitable for capitalists ... but deadly for us poor wage-earning types!

      There are moments when the body is as numinous as words, days that are the good flesh continuing. -- Robert Hass

      by srkp23 on Sun Sep 16, 2012 at 07:07:08 AM PDT

      [ Parent ]

      •  which is why the "keep interest rates low" (0+ / 0-)

        meme ultimately works against us.  We need to keep inflation under control (predictable) but rising interest rates actually will help the middle class write down there debt.  

  •  Libertarians have their own websites. (0+ / 0-)

    This isn't one of them.

    Romney '12: Berlusconi without the sex and alcohol!

    by Rich in PA on Sun Sep 16, 2012 at 05:58:48 AM PDT

  •  Ezra Kline has a good article that explains it. (1+ / 0-)
    Recommended by:

    " Here’s why everyone is so excited about what the Fed did yesterday"

    The way the Fed’s plan works — if it works — is that buying all these bonds will drive down long-term interest rates, which will give businesses and investors more incentive to spend now as opposed to sitting on their money waiting for later. It will make mortgages even cheaper, which should accelerate the housing market’s recovery.

    But the other part of the plan, and this part is really important, is that Bernanke just sent a signal to businesses and investors and the market and everyone else that the Fed is going to use its powers in a big, unusual way to get the economy moving. That’s a hugely important statement to make.

    Check it out. Find out why it's a good thing for the 99 percent. It's a good article to counter all the Republican spin and outrage in the press.

    Brand new favorite RSS feed of Daily Kos Radio Podcasts
    Jobs, Jobs, Jobs

    by We Won on Sun Sep 16, 2012 at 06:56:55 AM PDT

    •  This explanation is pure trickle-down! (3+ / 0-)
      Recommended by:
      pollwatcher, Mambo, aliasalias

      Investors (and banks) are sitting on their cash and have been for a loooooonng time. How much more stimulus do we need to give to the .1%?

      There are moments when the body is as numinous as words, days that are the good flesh continuing. -- Robert Hass

      by srkp23 on Sun Sep 16, 2012 at 07:08:47 AM PDT

      [ Parent ]

    •  Ezra is really wrong on this. (1+ / 0-)
      Recommended by:

      Interest rates are so low, an extra 3/4% isn't going to make much difference.  Much of the money Bernanke is going to print will end up in the stock market and commodities.  Inflating assets doesn't do anything to create demand or jobs.

    •  the real purpose is two fold - I think (0+ / 0-)

      One to maintain the housing prices (again buying into the bubble - inexplicably) and second to keep the dollar weak to prop up US exports.  

      The effects are clearer: it kills us at the pump, it will kill us in the housing market eventually, it take away our mobility as citizens of the world, and will make the debt situation that much worse.

    •  who will give people the money to BUY anything? (0+ / 0-)

      Businesses are not going to be hiring workers to produce anything until people have a demand for those things and that won't happen as long as people don't have jobs. Otherwise this sounds like more of the 'trickle down' philosophy.

      without the ants the rainforest dies

      by aliasalias on Sun Sep 16, 2012 at 04:53:59 PM PDT

      [ Parent ]

  •  It may not work because... (0+ / 0-) likely won't be nearly enough.  We're going to need well up into the trillions of fresh cash out there for a sufficient jump-start. And ideally spread around - to the rich and poor alike.

  •  What it means to this overseas retiree is that (1+ / 0-)
    Recommended by:

    my savings have lost 25% of their value due to the falling US$. With SS starting in 4 years, my guess is that I will be receiving half of what I budgeted because of the devaluation of the US$. Go USA!!!!!!!!!!!!!!!!!

    I voted with my feet. Good Bye and Good Luck America!!

    by shann on Sun Sep 16, 2012 at 08:12:09 AM PDT

    •  That happened to my brother (1+ / 0-)
      Recommended by:

       He retired from the federal government almost 10 years ago.  He lived in Rio for a couple of years very well on his retirement.  Then the dollar dropped.  He thought it would rebound and created a lot of credit card debt filling in the gaps until that happened.  It didn't.  He sold everything there and moved into my basement for 3 years while he paid off the debt.  It nearly destroyed our relationship as brother and sister to have him living here (at my expense) while he paid his debts.  He was very depressed.  It was like having a beached whale in my basement.  He slept 14 hours a day.  When the debt was paid, I made him move out.  His income was almost twice mine at the time.  I had no debt.  I live on a fixed income now.  There is no one who would do for me, what I did for my brother.  At some point in the next few years, I'll have to sell my house, which I own and slide out of the middle class once and for all.  The biggest strain on my budget is the cost of health insurance and the big co-pays, deductibles, which are probably 30% of my monthly income, all told.  I don't even go to the doctor all that often. I do what I can to economize on the cost of medications, but even the supplements my doctor wants me to take are very expensive.  Now with the rising cost of food and energy it's easy to see how our dollars buy less and less.  Good luck to you wherever you are living.

      Shine like the humblest star.

      by ljm on Sun Sep 16, 2012 at 08:40:33 AM PDT

      [ Parent ]

      •  I really appreciate the cautionary tale. Thank (0+ / 0-)

        you. The main reason I don't even consider moving back to Michigan (or a warmer state) is not having health insurance. Here in 3rd World SE Asia, I can still afford my family's medical and dental bills without worry. It just does not make sense to buy health insurance or go bare in the USA - both options are terrible. So, I am staying out here. I am not completely helpless against the falling US$, but it does really hurt. Even worse are the Americans with no savings and living off of SS here. They are heading for trouble....

        I voted with my feet. Good Bye and Good Luck America!!

        by shann on Sun Sep 16, 2012 at 10:41:53 AM PDT

        [ Parent ]

  •  Tipped and Recc'd (2+ / 0-)
    Recommended by:
    gramofsam1, Mambo

    For both the diary and the discussion it generated.

    There is no doubt in my mind but that we would be better served by deficit spending on needed infrastructure upgrades, but getting something like that passed requires a Democratic majority in both houses of Congress and Obama's reelection.  I hope it happens, but I'm not going to place any bets on it.   Since that's the case, the Fed action is the only game in town.  If it's imperfect, well, it's still better than nothing.

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