Quantitative Easing: Forever

Well here we go again….the Fed in its infinite wisdom has once again debased the saver in favor of the borrower. Moreover, the continued expansion of the Fed’s balance sheet for the benefit of the too big to fail financial institutions deserves scrutiny and transparency. Doubt the citizenry will ever get transparency about this super secret organization let alone a fair accounting of its actions.

However, once again, we are told that unless the Fed continues to lend to the too big to fail institutions that got us in the economic malaise that the world as we know it will end. To prevent the world from ending we must give the financial institutions free money so they can purchase long dated treasury bonds thereby generating a risk free return with virtually no cost. The net impact of QE3 for them is immediate and wonderful however for the average consumer not so much. Commodity prices are once again rising which has the effect of tamping down consumer spending.  Simply look at food and energy prices to see the average family cannot spend $65.00 to fill the family SUV and have significant discretionary disposable income available to maintain non food and energy consumption. The theoretical wealth effect engendered by QE3 may in fact be offset by the continually rising commodity prices the average citizen is exposed to.

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