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QE3: Helicopter Ben Bernanke Unleashes An All-Out Attack On The U.S. Dollar
You can’t accuse Federal Reserve Chairman Ben Bernanke of not living up to his nickname. Back in 2002, Bernanke delivered a speech entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here” in which he referenced a statement by economist Milton Friedman about fighting deflation by dropping money from a helicopter. Well, it might be time for a new nickname for Bernanke because what he did today was a lot more than drop money from a helicopter. Today the Federal Reserve announced that QE3 will begin on Friday, but it is going to be much different from QE1 and QE2. Both of those rounds of quantitative easing were of limited duration. This time, the quantitative easing is going to be open-ended. The Fed is going to buy 40 billion dollars worth of mortgage-backed securities per month until they have decided that the economy is in good enough shape to stop. For those that get confused by terms like “quantitative easing” and “mortgage-backed securities”, what the Federal Reserve is essentially saying is this: “We’re going to print a bunch of money and buy stuff for as long as we feel it is necessary.” In addition, the Federal Reserve has promised to keep interest rates at ultra-low levels all the way through mid-2015. The course that the Federal Reserve has set us on is utter insanity. Ben Bernanke can rain money down on us all he wants, but it is not going to do much at all to help the real economy. However, it will definitely hasten the destruction of the U.S. dollar.
And the Federal Reserve is apparently very eager to get QE3 going. Purchases of mortgage-backed securities are going to start on Friday.
In the coming months, hundreds of billions of dollars that the Federal Reserve has zapped into existence out of nothing will be injected into our financial system.
So what will happen to all of this new money?
If banks and financial institutions use that money to make loans then it could have somewhat of a positive impact on the economy in the short-term.
However, the truth is that it isn’t as if banks are hurting for cash to loan out. In fact, right now banks are already sitting on $1.6 trillion in excess reserves. Just like with the first two rounds of quantitative easing, a lot of the money from QE3 will likely end up being put on the shelf.
But the stock market loved the news because they know that the previous two rounds of quantitative easing have been great for the financial markets. On Thursday, the stock market soared to levels not seen since December 2007.
- Lindquist's blog
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Comments
Re: QE3: Helicopter Ben Bernanke Unleashes An All-Out Attack...
I would be happy if the Fed actually dropped money from helicopters. The government and central bankers have reduced the money supply in the real economy. And with congress talking about cutting social programs and raising taxes on the masses, the drive is to continue reducing the money supply, thereby increasing the depression.
However “quantitative easing” is not about dropping money on the masses. It's about helping rich bankers become richer.
The securities are worthless because the underlying mortgages are worthless. Thus, the securities have no fair market value. Thus, the Fed is making up a number when it says, “40 billion dollars worth of mortgage-backed securities.”
Buying these worthless, fraudulent securities from banks (who will charge whatever they want for them) will do nothing to help the economy. Today the banks make more money from buying T-bills than from lending. QE will keep the financial economy going, so that it can parasitically continue sucking from the real economy.
QE does not increase government spending (does not get money into the system) since Fed purchases of government bonds is not “spending.” QE does not increase private investment and consumption. QE does nothing to ease the depression. It has a little (but very little) effect on net exports (by slightly weakening the dollar) – but that’s it.
In short, it’s a scam.
Yes, but not into the real economy. As the article says further on, QE will not help the average person on the street. It will only help Wall Street, thus increasing the gap between the One Percent and everyone else.