As if our economy wasn't struggling enough, Ben Bernanke and his gang at the Fed have decided to make it really rough on us. Andrew Jackson was right when he abolished the central bank.
The Fed has determined to "stimulate" the ecomony by printing money to the tune of $600 billion to buy Treasury securities. They say they want to drive down interest rate and stimulate the dollar. How much lower can interest rates go? Most agree that this will have no affect on interest rates - and no additional affect on consumer spending or major purchases. The only thing that can happen is eroded purchasing power. Said another way, inflation.
This infusion of capital is projected to drive the value of the dollar down 20%, making it's effective buying power 80 cents. Since money won't go as far, businesses are going to have to charge more for the goods and services they sell just to get the same income.Marginal sales won't happen as often. Essential sales will cost more.
Yesterday, after this announcement, oil hit $86 a barrel - up substantially after gas prices had come back down a little. Sugar is projected to jump - along with coffee, corn items (nearly all processed foods), and other grocery items. All the while, housing prices are still dropping and unemploymnet is basically unchanged.
One of the first acts of the new Republican House should be to show Bernanke the door and shut down the government printing presses.
The $600 billion is not buying anything. They are merely exchanging that money (promisory notes from the federal reserve) for treasury securities (promisory notes from the treasury), and in the end, no one has any money to pay anyone else and each side just has pretty looking pieces of paper.
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Steve Hoffacker - Consultant, Coach, Author, Blogger, Photographer, Motivator, Teacher, & Strategist - for Realtors, Real Estate Sales Professionals, Home Builders, New Home Salespeople, Entrepreneurs, Small Business Owners, and Independent Sales Representatives.
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