Michael Hudson, a research professor of economics at the University of Missouri at Kansas City, said the Federal Reserve Board’s Qualitative Easing is a continuation of the bank bailout under another name.
Ben Bernanke, chair of the Federal Reserve, announced a commitment to buy mortgage-backed securities (toxic assets?) while keeping interest rates low. Pumping more money into the economy will supposedly make more money available for business loans and consumer purchases in the United States. But Hudson noted that so far the banks have found more profitable things to do with the Fed’s money than to invest it in the real U.S. economy.
At present the rate of inflation is low. But one cause (or definition) of inflation is too much money chasing too few goods. If money is created, but the money is not used to produce more goods, then (as I see it) inflation could return. Moderate inflation is supposed to be a cure for economic stagnation, but I can recall the “stagflation” of the 1970s when there was very serious inflation and economic stagnation at the same time.
Click on Fed to Buy More Bonds in Bid to Spur Economy for the Wall Street Journal’s explanation of the Federal Reserve’s rationale for QE.
Click on QE3 – Another Fed Giveaway to the Banks on the naked capitalism web log and scroll down to the discussion thread for the pros and cons of Hudson’s analysis.
Click on Michael Hudson | On finance, real estate and the powers of neoliberalism for Michael Hudson’s home page.
Tags: Bank Bailouts, Federal Reserve Board, MIchael Hudson, Qualitative Easing III, Real News Network, Wall Street
Phil Ebersole's Blog 
Leave a Reply