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The U.S. FED Printing $85 Billion Per Month of “Stimulus”

December 12th, 2012 Comments off


U.S. Federal Reserve Chairman, Ben Bernanke.

U.S. Federal Reserve Chairman, Ben Bernanke.

The U.S. FED Printing $85 Billion Per Month of “Stimulus”

original article written by Net Advisor

The FED is printing money to the tune of $85 Billion a month, buying U.S. Treasuries (U.S. debt) and mortgages. This hasn’t solved any of our financial or fiscal problems in the last 4 years; it has actually made them worse. But the government and the FED intend to keep on doing the same thing expecting a different result.

WASHINGTON DC. Historically consumer spending accounts for about 70% of the growth in the USA (Source: Bloomberg-Business Week PDF). Apparently all of this has changed. The U.S. Federal Reserve (The FED), who I argue is being influenced by the White House thinks it can replace consumer spending by printing money and dumping it into the economy. The FED is doing this two ways.

Is the FED, the “New Economy?” Government Financing Government.
(1) The FED is enabling the U.S. government to keep spending money it doesn’t have by getting the FED to purchase $45 Billion per month in U.S. Treasuries (debt issued by the U.S. government) (Source: Reuters).

(2) Next, the FED is also spending another $40 Billion per month on buying mortgages – presumably from the U.S. government (Fannie Mae and Freddie Mac). The U.S. government took over the failed mortgage companies in September 2008 (Source: Reuters). So what we have is the FED financing U.S. government debt, and U.S. mortgage debt. This is basically a so called government “independent” entity (the FED) financing the U.S. government.

All together we have the FED printing $85 Billion per month to buy U.S. government (Treasury) debt and U.S. mortgage debt.

“Fed officials committed to purchase $45 billion in longer-term Treasuries each month on top of the $40 billion per month in mortgage-backed bonds the U.S. central bank started buying in September. They also repeated a pledge to keep pumping money into the economy until the outlook for the labor market improves “substantially.””

— Source: Reuters, 12-12-2012

Do we need all this stimulus?
If the economy was truly in “recovery” which has been the claim since June 2009, then why does the FED need to print all this money? And what has all this money given us? Economic Prosperity? Jobs? Lower deficits? All of this stimulus gave us none of these things.

Video: Obama will cut the deficit (“he inherited”) in half pledge, February 2009.

Despite Obama’s 2009 pledge to “cut the deficit in half,” the result is that Obama increased the deficit by over $6 Trillion (article 1, article 2).

As of 12-12-2012, the U.S. National Debt stands at over $16.271 Trillion. This does not include unfunded obligations and off-balance-sheet transactions of the U.S. government (Source: US Debt For further reading on our articles covering the deficit, please see our archive.

FED’s  “Lower Unemployment” Fantasy
The FED intends to keep printing all this money until the the unemployment rate falls under 6.5%. The only problem is that this has not worked at all in the last four years.

Despite any “job creation,” net unemployment is higher, not lower since President Obama took office in January 2009 (article).

The Underline Problem is Government
CNBC noted that the FED seems to be taking place of Washington DC’s apparent lack of will to do anything pro-growth to help the economy on its own.

“Bernanke has time and again exhorted lawmakers in the nation’s capital to get serious about fiscal reform and economic growth.”

— Source: CNBC (PDF), 09-14-2012

FED’s “Low Inflation” Fantasy
The FED thinks it can create all this artificial economic stimulus and somehow inflation will remain low.

“The central bank said its commitment to hold rates steady until its new threshold was reached would hold as long as inflation was projected to be no more than 2.5 percent one or two years ahead and inflation expectations were contained.”

— Source: Reuters, 12-12-2012

So the FED thinks it can keep inflation at under 2.5%. This sounds like a novel idea, except for the fact that the FED has been wrong on inflation (article).

Inflation that Matters to Consumers? Oh, We Don’t Count That
When it comes to inflation, the U.S. government and the FED does not count the two most widely-used items by consumers: Food and Energy (article). So inflation is low if you don’t need to eat, use gas or heat.

Back on February 12, 2012 I reported how at that time oil prices alone skyrocketed 178% since President Obama came to office (article). So we are paying more for the same product and this is not inflation? OK, got it.

Fed Balance Sheet (2008-2012) (Image Credit:

FED’s Debt Risks?
The FED balance sheet is approaching $3 Trillion (Source: Bloomberg PDF). The move to print money and buy more U.S. debt and mortgages could bring the FED’s balance sheet to $4 Trillion (Source: Bloomberg PDF).

In case anyone thinks that racking up $85 Billion per month on your balance sheet could cause any harm or losses, the FED fixed that problem in 2011. The FED is using an accounting trick to make it appear that any losses they may incur will not affect the FED’s balance sheet (article).

Our View
The FED’s move seems to suggest that the economy is unable to recover on its own without trillions of artificial stimulus. Unless Washington lawmakers and the President get their act together come January 1, 2013, the U.S. is headed for the biggest tax increase in history (see chart).

There are also spending cuts but that won’t offset the tax increase. The spending cuts will mostly impact the U.S. defense budget [Source: (PDF)]. It seems that the FED’s move now is to hedge against another recession (article).

The Risks to the economy are huge if Washington does not rein in deficit spending. Higher taxes and trivial spending cuts that still result in deficits will not help the economy.

Just Tax the “Millionaires and Billionaires?” It’s actually $250K for Married Couples, $125K for Single Filers
The President is not likely to address any real financial reforms, will blame Republicans, seek higher taxes on what he has called “millionaires and billionaires.” The reality is Obama’s higher taxes specifically target a couple making $250,000 or more a year, or any single tax filer making $125,000 a year – BEFORE taxes. This is a far cry from taxing “millionaires and billionaires” isn’t it?

“Tax the Rich” Pays for 8 Days of Government
The gouge the so called “rich” (single filers making $125,000 a year, married filers making $250,000 per year before taxes) by increasing their taxes in 2013 does nothing to solve the U.S. debt problems. This Obama tax increase will only fund eight (8) days of government (Sources: Breitbart and NewsMax). What will the government do for the other 357 days? Sell its debt to the FED.

Coming in early 2013, Obama’s next financial crisis will be whether to raise the debt ceiling (again) (Source: Wall Street Journal).

I predict that President Obama will come out with the teleprompter making endless speeches how we need to raise the debt ceiling so social security and medicare recipients will receive “their” money. Forget about the fact that the president will add over $1 Trillion of new debt in 2013. The Obama mantra is spend, spend, spend. The FED’s mantra is buy, buy buy. Try this with your finances and see how long that works.


FED Image Credit: Herald Sun.AU. Other images may be copyright by their respective owner where noted.

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