Despite Fed pumping, economic outlook is anemic at best say experts
With the Obama administration’s attempts at fiscal policy on steroids failing miserably, the last tool at lawmakers disposal, to help boost the economy is monetary policy on steroids, or in Federal Reserve parlance: “Quantitative Easing, part II”.
That would mean another $600 billion in crisp, newly minted bills to purchase securities:
NEW YORK (Reuters) – The U.S. economy is expected to grow only modestly through next year, despite the Federal Reserve’s pledge to buy another $600 billion of government bonds and better signs in the job market, a Reuters poll showed.
U.S. gross domestic product (GDP) will grow at a 2.0 percent annualized rate in the current quarter, the same pace as the third quarter and unchanged from the consensus last month, according to the median forecast from almost 70 economists.
Growth is expected to accelerate to an annualized 2.2 percent in the first quarter of next year, and 2.5 percent in the second quarter of 2011, also unchanged from the last poll.
“We expect that the Fed’s new large-scale asset purchase program — dubbed QE2 — will likely boost growth only modestly, perhaps by 0.2 percent to 0.3 percent in 2011,” said Richard Berner, chief U.S. economist at Morgan Stanley.
Berner added that QE2 ought to help limit downside risks to both growth and inflation. The Fed said last week it could make further purchases beyond the middle of next year if it deems that necessary.
The first round of QE totaled about $1.7 trillion. Add in QE II, and we’re looking at over $2 trillion in newly printed greenbacks, in an economy whose GDP is approximately $14 trillion.
Think about that for a moment–the Federal Reserve has created about 16% of the total US GDP’s worth in new currency, right out of thin air. I’m certainly no expert in monetary policy, but that gives me an uneasy feeling. In fact, that should scare the bejesus out of us all.
UPDATE. What happens when the Federal Reserve shifts the printing press into overdrive? You get
too many a lot of greenbacks floating around the world, and when that happens, the value of the dollar heads south. And when that happens, you get a boom in gold. (It’s almost as if the Feds are purposely trying to destroy our currency. That, or they have no clue what they’re doing.) If anything, Glenn Beck is guilty of honesty in advertising.
UPDATE. Welcome The Other McCain readers…