By Dick Morris - 07/23/13 10:38 PM EDT
How can Federal Reserve Chairman Ben Bernanke justify his decision to approve another round of “quantitative easing” by citing the lack of an assured recovery in the U.S. economy?
How can he pretend that his decisions to continue or discontinue the wholesale printing of money and to maintain or end interest rates near zero percent have anything to do with unemployment or the inflation rate?
Crony capitalism has taken over the government. The Fed prints the money. Then it gives it away for no interest and in exchange for moribund mortgage-backed securities. The recipients gamble the night away playing the stock market and the $1.4 quadrillion derivative market, content in the assurance that if they fail, the feds will guarantee them and prop them back up. Too big to fail covers their downside risk. Free money encourages their upside gambling.
Record bank profits amid a stalled economy attest to this ongoing misdistribution of resources. Crony capitalism and big government advance in tandem, making the very rich much richer and leaving the rest of the economy in dismal shape.
The stock market — recipient of the funny money — has investors hypnotized. They pay no attention to the near-zero economic growth rate or the miniscule job-creation numbers, instead focusing on the dizzying heights as the Dow sets daily records. But the Olympian levels are themselves artificial, impelled by quantitative easing, which puts free money in the hands of the banks and brokerages that they can invest in the market as they wish. At some point soon, they will tire of the game and pull their money out. And the market will crash.
Quantitative easing increasingly resembles the foreign aid program. The U.S. taxpayer sends tens of billions of dollars overseas in the idealistic expectation that the money will alleviate poverty and suffering in the third world. Instead, dictators and petty tyrants pocket the money and send it abroad to their Swiss bank accounts for safe keeping, all the while pleading for more aid to their countries’ poor.
When Bernanke says he will end QE3 when the unemployment rate drops to 6.5 percent or inflation rises above 2 percent, he is citing ridiculous and irrelevant yardsticks.
The only way unemployment is going to drop in an economy as moribund as ours is if a sufficient number of us are persuaded to give up looking for work and drop out of the labor force as a result. The inflation rate will likely remain comfortably below 2 percent as long as you continue to exclude food and fuel from its calculation, the two most inflation-sensitive aspects of our consumer spending.
Of course, Bernanke is not limited by these statistics. He is limited only by the greed of his cronies, so QE3 will continue on and on.
Morris, a former adviser to Sen. Trent Lott (R-Miss.) and President Clinton, is the author of 16 books, including his latest, Screwed and Here Come the Black Helicopters. To get all of his and Eileen McGann’s columns for free by email, go to dickmorris.com.