Thursday, September 13, 2012

QE3? What About QE Me?

The U.S. Federal Reserve has once again decided to goose the nation's economy by instituting Quantitative Easing, Part III. They will be buying billions of dollars of mortgage backed securities each month for as long as they feel is necessary to drive the economy out of its funk. As a result, the stock market staged a huge rally today, to within just a few percentage points of its all time high.

Well, isn't that special. What I, and many in this country, want to know is, what have they done to help me? I assume the Fed buying MBS by the truckload will resurrect this country because that's what all the news analysts are saying but it still seems pretty obscure to me. Median inflation-adjusted income in this country has fallen to levels last seen in the 1990's. The poverty level in the U.S. is over 15%. The rich are getting richer and the middle class is shrinking. Seems to me the govenment buying an obscure monetary unit like mortgage backed securities will only benefit the rich, who probably do own these things. How many of your neighbors do you think own MBS? Unless your neighbor is Bill Gross, so called Bond King at PIMCO, how is the Fed's buying of MBS going to make your life better? The only people who make out well, as usual, are the Wall Street traders and bankers who own and handle MBS. Notice the sharp rise in bank stocks after the Fed announcement. These are the people who actually get face time with the Federal Reserve governors and White House invitations for suggestions on how to improve the economy. Is it any wonder real estate prices in Manhattan and London are at all time highs?

All I know is that the Fed has been keeping interest rates close to zero for years now, decimating savings accounts. The elderly are ever more dependent on their Social Security because their savings are being destroyed for lack of compounded interest earnings. Starting next year, we are facing the so called fiscal cliff where taxes will be raised on income, dividends, capital gains, and payroll. Gas prices here in California are over $4 per gallon. I'm getting nickeled and dimed to death every time I get on an airplane. There are almost thirty kids in each of the classrooms of my children's elementary school. Thousands of students are not able to attend college because of budget cutbacks and tuition increases yet the state will spend billions on a high speed train to nowhere. Doctors are facing a 29% cut in their reimbursements for treating Medicare patients. This is my reality. Color me unimpressed with the Fed's plans today. Where is the quantitative easing that will make a real impact in my world?

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