there moderate total inflation because - the banks are trying to seize all the assets from the poorest and weakest in the nation, so they are heavily restricting the money supply to the people to make loan payments very difficult. but the fed is creating unprecedented amounts of money - but giving it all to the banks. so you end up with money getting pulled out of the average person and going to the banks and biggest corporations.

incidentally the banks are using this money for things such as buying politicians and media and real assets. the very limited partial edit of the fed showed it gave money to media companies, for example msnbc. and a lot of their stimulus buys up stocks, so they are acquiring companies as well. but mostly the fed is just giving money to the banks, who then use it to buy up the rest of the economy.

basically we are transitioning to an economy that is owned totally by the people who control the financial sector.

QE is most definitely NOT about stimulating demand. QE is, as I said, about HQC, re-hypothication, and the "shadow banking system." They are fixing the brokerage accounts of the mega banks. Any resultant improvement in the underlying economy (which there has been none) is merely a byproduct, not the intent.

I disagree Michigan man. The low interest rates definitely generated demand in the housing market. The housing recovery didn't rely on wage growth, GDP growth, or employment growth. The same can be said of the demand for automobiles. These are two large sectors of the American economy. I'm not saying that QE doesn't have potentially disastrous side effects that outweigh the benefits. In fact I think the Fed should raise rates, but I continue to argue that Bernanke is using QE to increase aggregate demand, and not the shadow banking system. The banks are flush with cash. They simply have no large supply of credit worthy applicants seeking loans in the current economic client. I think the downside of QE is the fact it is creating demand bubbles, and these bubbles will burst when Bernanke tries to exit.

@Emac,

Do you believe that the Fed is essentially an institution that has the best interest of the US economy/people at heart?

Damn Blankmind is still back.

Michigan Man, that's a pretty broad question. "The Fed" is nothing but the board of governors in charge of it at a given time, just like "The Executive Branch" is different under each president. As far as Ben Bernanke's policy I absolutely believe he has the best interest of the American economy as heart given his economic theory. He is a student of the failed fed policy in response to the Great Depression in the Hoover Administration, and believes that deflation is a much worse threat than inflation. I think also believes in the new GDP targeting monetary policy. Do I think he is conspiring to empower the financial elite, no. Do I believe his policies disproportionately benefit the financial elite, yes. Are there other economic theories to follow, Hyman Minsky and Robert Mundell come to mind.

Wow, I actually agree with Emac's statement from this morning.

Though I disagree that you think inflation is worse than deflation. Japan has been doing nothing the past 20 years because of deflation. Switzerland is now in a lot of trouble due to deflation.

What specifically of Mundell do you have in mind though? I'm only familiar with his work on exchange rate regimes and OCA.

Goldfinger, I didn't say I thought inflation was worse than deflation. I said Bernanke thinks deflation is worse than inflation. I agree with the idea that deflation is more harmful than inflation. Mundell had interesting ideas about monetary policy. He thought that raising interest rates attracted capital. So raising interest rates can benefit an economy. When individual companies want to attract investment they raise their dividend. Mundell also championed the private sector over Keynes emphasis on government stimulus. He liked cutting taxes instead of increasing government spending.

I think it's a double-edge sword there with raising interest rates. Because yes, on one hand raising interest rates makes you more attractive to investors. This has been shown...well, everywhere in the world.

However, this is only necessary if there isn't a large supply of capital - such as in emerging markets. I think in many advanced economies, the benefit of increasing capital flows into the country will be offset by decreased economic activity within the country associated to higher costs of borrowing.

But I'll have to look into some of his monetary work

"QE is, as I said, about HQC, re-hypothication, and the "shadow banking system.""

The standard criticism of QE is that it undermines the shadow banking system by reducing the amount of high quality bonds available, so I don't know what you're referring to here.

"They are fixing the brokerage accounts of the mega banks."

Explain.

It doesn't matter whose interests the Fed serve, really, because ultimately the Fed doesn't influence things very much.

Except when they mention tapering and the yields jump 1%....

Which impacts an industry which comprises 5% of GDP.

Actually it impacts every corporation that issues bonds.

Which is most of them.

Monetary policy does not occur in a vacuum. It is simply a policy tool among many. If coordinated with other policies monetary policy can produce an enormous effect. The problem in the Obama administration's fiscal policy directly contradicts the Fed's monetary policy because increased government spending lavished on utterly unproductive enterprise required fiscal policy to raise taxes. Couple this with uncertainty created by the ACA and the near constant agitation and rhetoric from the administration against free market profit seeking, and Bernanke's policy ends up insignificantly influence broad growth while increasing demand in area of the economy sensitive to interest rates, mortgages and car sales. Imagine if the Obama administration did not undertake the stimulus at all and instead cut taxes by $900 billion and left the private sector free to invest that money in productive enterprise like the Keystone Pipeline instead of the government green energy boondoggles like the Solyndra bankruptcy that produced no sustainable growth. The list of mistakes by the Obama administration is damn near endless. Bernanke shoulders no blame at all for the continuing high levels of unemployment and the stubborn low levels of growth.

A third of ARRA was actually tax cuts and credits, Emac. Nearly $300 million worth.

"It doesn't matter whose interests the Fed serve, really, because ultimately the Fed doesn't influence things very much."

Obviously you don't spend much time in the markets. The Fed is the ONLY reason why we keep seeing all time highs on the Dow and the S&P. Heck, I can watch the charts and tell you when POMO purchases hit the tape, and it ALWAYS causes an irrational green stick.

What were the tax cuts 2wl?

QE is a theft. The Fed it recapitalizing the banks that made bad bets and had trillions of toxic assets on their books. Can't let them take the losses the deserve, no, that wouldn't do. Better to print and buy them back so they can then make even more levered bets with those funds and blow the bubble up EVEN higher!

@Emac, if you think Bernake and his cabal of idiots are looking out for you, you're woefully naive. The Fed is keeping the crisis mode policy going but claiming we re not in a crisis. Why? Do really think they are soon to be the ONLY buyer of US Treasuries because they're nice? There is an end game, and it ain't pretty (unless you're short the market).

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009#Tax_incentives

Of course I don't play the markets. The markets are irrelevant with respect to the real economy, which is obvious from the fact that the former has soared while the latter is stagnant.

Exactly. QE is for banks, not the US Economy. I'm in them every day and I can tell the Fed influences thing an incredible amount, here and worldwide.

Well Michigan Man we obviously have a difference of opinion.

2wl, horrible incentives for growth in your link. It's too bad that the ARRA didn't follow the example of ERTA.

I don't understand this OP.

Of course the bailouts benefited the banks. The banks were bailed out!

Have you only just noticed this stupid thread, YJ ?

yellowjacket - you are an idiot. i am wondering why 30% think others were benefited more.

but some points to note - who benefited greatly from the bailouts (according to americans)
poor - 8%
middle class - 6%
small business - 6%
wealthy people - 38%
large corporations - 41%
large banks and financial institutions - 40%

so it looks like the visitors to this site (based on what i have read) are less knowledgeable than the average american. it seems the typical person knows that the bailouts did not benefit anyone but the rich as it was a upward wealth redistribution program by bush and obama.

this is bullshit though, the study (or maybe just the press release) does not separate not much from not at all.
so we see that 72% of americans say the bailouts benefited the poor not much or not at all. i assume the vast majority of that is in the not at all category. but lumping those two together avoids showing it, i guess.