O emprego de UM MILHAO de dolares: interessado?

Não, não é o que você está pensando?
Eu não estou oferecendo -- nem poderia, sendo um modesto assalariado desse nosso modestíssimo governo, num país nem tão modesto assim, já que os companheiros são sempre hiperbólicos, aliás, os maiores, desde Cabral -- nenhum emprego nessa faixa de rendimento.
Isso é o que está custando (talvez até mais) cada emprego penosamente criado pelas poderosas injeções fiscais do governo americano, que tenta tirar leite de pedra, ou seja, fazer a economia reviver à custa de bilhões, centenas de bilhões de dólares de "estímulos keynesianos".
O Fed (através do Mint americano) está despejando dinheiro como nunca na economia, e a despeito de não terem iniciado um terceiro QE (ou quantitative easing, ou seja, despejar dinheiro na economia, de helicóptero sobre Wall Street e nas velhas indústrias decadentes), estão trabalhando como nunca trabalharam, desde a grande depressão, para ver se a economia deslancha.
Quem a Coreia do Norte não resolve o problema, assim como o fizeram nazistas e fascistas em face de um New Deal moribundo?
Isso deixaria os marxistas muito contentes, pois eles nunca deixaram de achar que o capitalismo, quando tem uma dessas crises de "superprodução" -- eu nunca deixarei de me surpreender em face das contradições marxistas -- arranja logo uma guerra para fazer a sua destruição criativa e assim continuar acumulando capital. Vá lá entender...
Em todo caso, o artigo abaixo, desse jornal desavergonhadamente capitalista que é o WSJ, trata do assunto. Sim, se trata de empregos a um milhão de dólares, mas é isso que vai custar ao contribuinte americano criar alguns milhares de novos empregos, quando o setor privado poderia estar fazendo isso, se o governo não se metesse muito no seu caminho.
Paulo Roberto de Almeida 

• OPINION
• The Wall Street Journal, March 25, 2013, 7:07 p.m. ET

Mortimer Zuckerman: The Great Recession Has Been Followed by the Grand Illusion

Don't be fooled by the latest jobs numbers. The unemployment situation in the U.S. is still dire.

By MORTIMER ZUCKERMAN

The Great Recession is an apt name for America's current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.
The country isn't really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.
And last year's anemic growth looks likely to continue. Sequestration will take $600 billion of government expenditures out of the economy over the next 10 years, including $85 billion this year alone. The 2% increase in payroll taxes will hit about 160 million workers and drain $110 billion from their disposable incomes. The Obama health-care tax will be a drag of more than $30 billion. The recent 50-cent surge in gasoline prices represents another $65 billion drag on consumer cash flow.
February's headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be "outstanding" and "amazing." But if you account for the people who are excluded from that number—such as "discouraged workers" no longer looking for a job, involuntary part-time workers and others who are "marginally attached" to the labor force—then the real unemployment rate is somewhere between 14% and 15%.

Other numbers reported by the Bureau of Labor Statistics have deteriorated. The 236,000 net new jobs added to the economy in February is misleading—the gross number of new jobs included 340,000 in the part-time, low wage category. Many of the so-called net new jobs are second or third jobs going to people who are already working, rather than going to those who are unemployed.
The number of Americans unemployed for six months or longer went up by 89,000 in February to a total of 4.8 million. The average duration of unemployment rose to 36.9 weeks, up from 35.3 weeks in January. The labor-force participation rate, which measures the percentage of working-age people in the workforce, also dropped to 63.5%, the lowest in 30 years. The average workweek is a low 34.5 hours thanks to employers shortening workers' hours or asking employees to take unpaid leave.
Since World War II, it has typically taken 24 months to reach a new peak in employment after the onset of a recession. Yet the country is more than 60 months away from its previous high in 2007, and the economy is still down 3.2 million jobs from that year.
Just to absorb the workforce's new entrants, the U.S. economy needs to add 1.8 million to three million new jobs every year. At the current rate, it will be seven years before the jobs lost in the Great Recession are restored. Employers will need to make at least 300,000 hires every month to recover the ground that has been lost.
The job-training programs announced by the Obama administration in his State of the Union address are sensible, but they won't soon bridge the gap for workers with skills in science, technology, engineering and mathematics. Nor is there yet any reform of the patent system, which imposes long delays on innovators, inventors and entrepreneurs seeking approvals. It often takes two years to obtain the environmental health and safety permits to build a modern electronic plant, a lifetime in the tech world.
When employers can't expand or develop new lines because of the shortage of certain skills, the employment opportunities for the less skilled are also restricted. To help with this shortage, the administration's proposals for job-training programs do deserve support. The stress should be on vocational training, postsecondary education and every program that will broaden access to computer science and strengthen science, technology, engineering and math in high schools and at the university level.
But the payoffs from these programs are in the future, and it is vital today to increase the number of annual visas and grants of permanent residency status for foreigners skilled in science and technology. The current situation is preposterous: The brightest and best brains from all over the globe are attracted to American universities, but once they get their degrees America sends them packing. Keeping these foreigners out means they will compete against us in the industries that are growing here and around the world.
What the administration gives us is politics. What the country needs are constructive strategies free of ideology. But the risks of future economic shocks will multiply so long as we remain locked in a rancorous political culture with a leadership more inclined to public relations than hardheaded pragmatic recognition of what must be done to restore America's vitality.

Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.

A version of this article appeared March 26, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: The Great Recession Has Been Followed by the Grand Illusion.

29 de Outubro de 1929: a quinta-feira mais negra da historia (pelo menos para quem tinha ações em Wall Street...)

ON THIS DAY

On This Day: October 29

The New York Times, October 29, 2012

On Oct. 29, 1929, stock prices collapsed on the New York Stock Exchange amid panic selling. Thousands of investors were wiped out.

Stocks Collapse In 16,410,030-share Day, But Rally At Close Cheers Brokers; Bankers Optimistic, To Continue Aid

---

---

CLOSING RALLY VIGOROUS

---

Leading Issues Regain From 4 to 14 Points in 15 Minutes

---

INVESTMENT TRUSTS BUY

---

Large Blocks Thrown on Market at Opening Start Third Break of Week.

---

BIG TRADERS HARDEST HIT

---

Bankers Believe Liquidation Now Has Run Its Course and Advise Purchases

---

RELATED HEADLINESLeaders See Fear Waning: Points to "Lifting Spells" in Trading as Sign of Buying ActivityOTHER HEADLINESGrundy For Curbing "Backward States" On The Tariff Bill:Veteran Republican Lobbyist Tells Senate Inquiry the West Needs "Silencing." Coalition Fighting Move To Kill Tariff:Will Try to Force Through Bill, While Reed Favors Ending Session Nov. 15. Kahn Refuses Post In Senate Campaign: Calls Choice Unwise:He Writes to Moses to Withhold His Name for Treasurer Due to "Divided Reception." Missing Airliner Brought in Safely U.S. Steel To Pay $1 Extra Dividend:American Can Votes the Same and Raises Annual Rate From $3 to $4 Reserve Board Finds Action Unnecessary:Six-Hour Session Brings No Change in the New York Rediscount Rate.

Stock prices virtually collapsed yesterday, swept downward with gigantic losses in the most disastrous trading day in the stock market's history. Billions of dollars in open market values were wiped out as prices crumbled under the pressure of liquidation of securities which had to be sold at any price.

There was an impressive rally just at the close, which brought many leading stocks back from 4 to 14 points from their lowest points of the day.

From every point of view, in the extent of losses sustained, in total turnover, in the number of speculators wiped out, the day was the most disastrous in Wall Street's history. Hysteria swept the country and stocks went overboard for just what they would bring at forced sale.

Efforts to estimate yesterday's market losses in dollars are futile because of the vast number of securities quoted over the counter and on out-of-town exchanges on which no calculations are possible. However, it was estimated that 880 issues, on the New York Stock Exchange, lost between $8,000,000,000 and $9,000,000,000 yesterday. Added to that loss is to be reckoned the depreciation on issues on the Curb Market, in the over the counter market and on other exchanges.

Two Extra Dividends Declared

There were two cheerful notes, however, which sounded through the pall of gloom which overhung the financial centres of the country. One was the brisk rally of stocks at the close, on tremendous buying by those who believe that prices have sunk too low. The other was that the liquidation has been so violent, as well as widespread, that many bankers, brokers and industrial leaders expressed the belief last night that it now has run its course.

A further note of optimism in the soundness of fundamentals was sounded by the directors of the United States Steel Corporation and the American Can Company, each of which declared an extra dividend of $1 a share at their late afternoon meetings.

Banking support, which would have been impressive and successful under ordinary circumstances, was swept violently aside, as block after block of stock, tremendous in proportions, deluged the market. Bid prices placed by bankers, industrial leaders and brokers trying to halt the decline were crashed through violently, their orders were filled, and quotations plunged downward in a day of disorganization, confusion and financial impotence.

Change Is Expected Today

That there will be a change today seemed likely from statements made last night by financial and business leaders. Organized support will be accorded to the market from the start, it is believed, but those who are staking their all on the country's leading securities are placing a great deal of confidence, too, in the expectation that there will be an overnight change in sentiment; that the counsel of cool heads will prevail and that the mob psychology which has been so largely responsible for the market's debacle will be broken.

The fact that the leading stocks were able to rally in the final fifteen minutes of trading yesterday was considered a good omen, especially as the weakest period of the day had developed just prior to that time and the minimum prices for the day had then been established. It was a quick run-up which followed the announcement that the American Can directors had declared an extra dividend of $1. The advances in leading stocks in this last fifteen minutes represented a measurable snapback from the lows. American Can gained 10; United States Steel common, 7 /2, General Electric, 12; New York Central, 14 1/2, Anaconda Copper, 9 1/2; Chrysler Motors 5 1/4; Montgomery Ward, 4 1/4 and Johns Manville, 8. Even with these recoveries the losses of these particular stocks, and practically all others, were staggering.

Yesterday's market crash was one which largely affected rich men, institutions, investment trusts and others who participate in the stock market on a broad and intelligent scale. It was not the margin traders who were caught in the rush to sell, but the rich men of the country who are able to swing blocks of 5,000, 10,000 up to 100,000 shares of high-priced stocks. They went overboard with no more consideration than the little trader who was swept out on the first day of the market's upheaval, whose prices, even at their lowest of last Thursday, now look high in comparison.

The market on the rampage is no respecter of persons. It washed fortune after fortune away yesterday and financially crippled thousands of individuals in all parts of the world. It was not until after the market had closed that the financial district began to realize that a good-sized rally had taken place and that there was a stopping place on the downgrade for good stocks.

Third Day of Collapse

The market has now passed through three days of collapse, and so violent has it been that most authorities believe that the end is not far away. It started last Thursday, when 12,800,000 shares were dealt in on the Exchange, and holders of stocks commenced to learn just what a decline in the market means. This was followed by a moderate rally on Friday and entirely normal conditions on Saturday, with fluctuations on a comparatively narrow scale and with the efforts of the leading bankers to stabilize the market evidently successful. But the storm broke anew on Monday, with prices slaughtered in every direction, to be followed by yesterday's tremendous trading of 16,410,030 shares.

Sentiment had been generally unsettled since the first of September. Market prices had then reached peak levels, and, try as they would, pool operators and other friends of the market could not get them higher. It was a gradual downward sag, gaining momentum as it went on, then to break out into an open market smash in which the good, the bad, and indifferent stocks went down alike. Thousands of traders were able to weather the first storm and answered their margin calls; thousands fell by the wayside Monday and again yesterday, unable to meet the demands of their brokers that their accounts be protected.

There was no quibbling at all between customer and broker yesterday. In any case where margin became thin a peremptory call went out. If there was no immediate answer the stock was sold out "at the market" for just what it would bring. Thousands, sold out on the decline and amid the confusion, found themselves in debt to their brokers last night.

Three Factors in Market

Three factors stood out most prominently last night after the market's close. They were: Wall Street has been able to weather the storm with but a single Curb failure, small in size, and no member of the New York Stock Exchange has announced himself unable to meet commitments.

The smashing decline has brought stocks down to a level where, in the opinion of leading bankers and industrialists, they are a buy on their merits and prospects, and brokers have so advised their customers.

The very violence of the liquidation, which has cleaned up many hundreds of sore spots which honeycombed the market, and the expected ability of the market to right itself, since millions of shares of stock have passed to strong hands from weak ones.

Bids Provided Where Needed

One of the factors which Wall Street failed to take into consideration throughout the entire debacle was that the banking consortium has no idea of putting stocks up or to save any individuals from loss, but that its sole purpose was to alleviate the wave of financial hysteria sweeping the country and provide bids, at some price, where needed. It was pointed out in many quarters that no broad liquidating movement in the stock market has ever been stopped by so-called good buying. This is helpful, of course, but it never stops an avalanche of liquidation, as was this one.

There is only one factor, it was pointed out, which can and always does stop a down swing--that is, the actual cessation of forced liquidation. It is usually the case, too, that when the last of the forced selling has been completed the stock market always faces a wide-open gap in which there are practically no offerings of securities at all. When that point is reached, buying springs up from everywhere and always accounts for a sharp, almost perpendicular recovery in the best stocks. The opinion was widely expressed in Wall Street last night that that point has been reached, or at least very nearly reached.

Huge Blocks Offered at Opening

The opening bell on the Stock Exchange released such a flood of selling as has never before been witnessed in this country. The failure of the market to rally consistently on the previous day, the tremendous shrinkage of open market values and the wave of hysteria which appeared to sweep the country brought an avalanche of stock to the market to be sold at whatever price it would bring.

From the very first quotation until thirty minutes after 10 o'clock it was evident that the day's market would be an unprecedented one. In that first thirty-minutes of trading stocks were poured out in 5,000, 10,000, 20,000 and 50,000 share blocks at tremendous sacrifices as compared with the previous closing. The declines ranged from a point or so to as much sa 29 1/2 points, and the reports of opening prices brought selling into the market in confused volume that has never before been equaled.

In this first half hour of trading on the Stock Exchange a total of 3,250,800 shares were dealt in. The volume of the first twenty-six blocks of stock dealt in at the opening totaled more than 630,000 shares.

There was simply no near-by demand for even the country's leading industrial and railroad shares, and many millions of dollars in values were lost in the first quotations tapped out. All considerations other than to get rid of the stock at any price were brushed aside.

Brokerage Offices Crowded

Wall Street was a street of vanished hopes, of curiously silent apprehension and of a sort of paralyzed hypnosis yesterday. Men and women crowded the brokerage offices, even those who have been long since wiped out, and followed the figures on the tape. Little groups gathered here and there to discuss the fall in prices in hushed and awed tones. They were participating in the making of financial history. It was the consensus of bankers and brokers alike that no such scenes ever again will be witnessed by this generation. To most of those who have been in the market it is all the more awe-inspiring because their financial history is limited to bull markets.

The machinery of the New York Stock Exchange and the Curb market were unable to handle the tremendous volume of trading which went over them. Early in the day they kept up well, because most of the trading was in big blocks, but as the day progressed the tickers fell further and further behind, and as on the previous big days of this week and last it was only by printing late quotations of stocks on the bond tickers and by the 10-minute flashes on stock prices put out by Dow, Jones & Co. and the Wall Street News Bureau that the financial district could get any idea of what was happening in the wild mob of brokers on the Exchange and the Curb.

Peaks Reached in September

The bull market, the most extensive in the history of the country, started in the Coolidge Administration and reached its height with a tremendous burst of speculation in the public utility issues, the flames of speculation being fed by mergers, new groupings, combinations and good earnings.

The highest prices were reached in early September. At that time the market had a quick break and an equally rapid recovery. Then started a slow sag. Two developments, not considered important at the time, served to start the ball rolling downhill. The first of these was the refusal of the Massachusetts Public Service Commission to permit the Boston Edison Company to split its shares; the second was the collapse of a pool in International Combustion Engineering shares on the Stock Exchange, an over-exploited industrial which had been pushed across 100 by a pool and which crashed when the corporation passed its dividend.

In the meanwhile, the Hatry failure abroad had diverted a tremendous volume of selling to the United States, and under these influences the market continued to sag until it literally crumpled of its own weight.

Cada um tem o Lula que merece - João Luiz Mauad

O Lula deles
João Luiz Mauad
O Globo, 13/08/2011

“O fato de que estamos aqui hoje para debater o aumento do limite da dívida americana é um sinal de fracasso das nossas lideranças. É um sinal de que o governo dos Estados Unidos não pode pagar suas próprias contas. É um sinal de que agora dependemos da assistência financeira de países estrangeiros para financiar as políticas fiscais irresponsáveis do nosso governo.... O aumento do limite da dívida da América nos enfraquece nacional e internacionalmente. Liderança significa responsabilidade pelas próprias decisões. Em vez disso, Washington está jogando o ônus de suas más escolhas de hoje nas costas dos nossos filhos e netos. A América tem um problema com a dívida e uma falha de liderança. Os americanos não merecem isso. Eu, portanto, sou contra o aumento do limite da dívida.”

Sabe de quem são essas duras palavras, caro leitor? Acredite, o discurso acima foi proferido pelo então senador Barak Obama, ainda em 2006, quando o Congresso daquele país discutia o limite da dívida federal, durante o mandato de George W. Bush. Na época, o aumento aprovado trouxe o teto da dívida para US$ 9 trilhões. Sob a presidência de Obama, o número já fora elevado para US$ 14,3 trilhões. Antes do recente aumento, portanto, a dívida já estava 60% maior do que quando ele sinalizava um suposto "fracasso de liderança", há cinco anos.

Malgrado a enormidade dos números, os políticos norte americanos chegaram a um acordo, ao apagar das luzes, evitando assim que o governo daquele país ficasse inadimplente perante os seus credores internos e externos. Entre mortos e feridos, salvaram-se todos – pelo menos por enquanto.

Durante a longa queda de braço, fomos bombardeados por notícias e comentários - ecoados principalmente do notório New York Times, carro-chefe da mídia liberal (esquerdista) americana, à frente o estridente “nobelado” Paul Krugman - acerca do radicalismo e irresponsabilidade dos conservadores, capitaneados pelos fundamentalistas/terroristas do Tea Party, que insistiam numa postura de prudência e parcimônia – oh! Grande heresia! - em relação aos gastos do governo e, consequentemente, em relação à dívida pública. Aliás, os economistas podem discordar sobre o montante da dívida que um governo pode carregar com segurança, mas há certo consenso de que 100% do PIB é demais, especialmente quando se olha para os efeitos sobre a atividade econômica.

Mas os ditos radicais do Tea Party cometeram o supremo pecado de contrariar São Obama e, principalmente, a visão progressista segundo a qual quanto mais o governo gasta e se intromete na vida privada das pessoas, melhor para todo mundo. Embora seja muito difícil para qualquer pessoa de bom senso entender como é possível que um endividamento constante e progressivo do governo possa ser algo sadio, o que se viu foi o linchamento sem trégua dos atrevidos que se recusavam, constitucional e democraticamente, a dar carta branca para o executivo gastar a vontade.

Neste ponto, pode ser útil esclarecer exatamente sobre o quê estavam discutindo os dois lados. A questão não era propriamente se o governo federal deveria ou não expandir os seus gastos. Quase ninguém em Washington propôs o encolhimento do leviatã. Ao contrário, no final de dez anos tanto os gastos nominais quanto a dívida total serão bem maiores do que são hoje. Tenha-se em mente ainda que esses aumentos virão após uma das mais rápidas expansões de gastos federais na história dos EUA – desde que Obama tomou posse, houve um aumento de aproximadamente 30% em relação ao último ano de Bush.

Ademais, pouco se falou sobre isso, mas durante a maior parte do tempo o impasse esteve ancorado não no radicalismo do Tea Party, mas na intransigência do presidente, que insistia, mesmo contra a opinião majoritária do seu próprio partido, em aprovar limites muito maiores, além de aumentos de impostos.

Finalmente, pode-se discutir o que for, mas não é apropriado dizer que não havia legitimidade do legislativo para debater o tema, afinal eles foram eleitos exatamente para isso. Ao contrário da escatologia do NYT, a verdade é que o Congresso americano deu uma lição de democracia ao mundo, apesar do comportamento malsão de Obama, que, com discursos irresponsáveis, insistia em jogar a opinião pública contra os congressistas. Quisera eu que os nossos políticos discutissem os temas importantes da nação como fizeram os yankees, sem barganhas por cargos, liberação de verbas ou mensalões, mas apenas defendendo o que consideram melhor para o país.

A verdadeira natureza da crise americana - Philipp Bagus (Mises)

Uma explicação sensível, e "sencilla", como diriam os hermanos, sobre a natureza da crise nos EUA, e uma interpretação mais correta e fiável sobre como e por que as autoridades monetárias americanas estão prolongando a crise...
Paulo Roberto de Almeida

Will There Be QE3, QE4, QE5...?
by Philipp Bagus
Mises Daily, December 31, 2010

Recently, Ben Bernanke indicated that Quantitative Easing II (QE2) might be followed by QE3, etc. In an interview at the beginning of December, Bernanke was asked, "Do you anticipate a scenario in which you would commit to more than $600 billion?"

Bernanke's answer was startling. "Oh, it's certainly possible," he said. "And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks."

The answer is interesting because it not only indicates the possibility that the Federal Reserve (Fed) will purchase more government bonds but also implies that Bernanke thinks that inflation and QE are different concepts, because otherwise his claim would be a meaningless tautology: more inflation depends on inflation.

To make sense of Bernanke's technical talk, let us go back to the beginning of the infamous QE, to the darkest months of the financial crisis. During the boom fired by artificially low interest rates, financial institutions had financed malinvestments, especially in the housing sector. When the bubble burst and housing prices started to fall, these investments lost value rapidly. Bank losses mounted, bank equity fell, and solvency problems arose. Liquidity dried up as financial institutions started to doubt each other's solvency given the problematic loans on their books.

When credit markets dried up in September 2008, after the collapse of Lehman Brothers, loans that financed malinvestments did not serve as collateral for interbank lending anymore. The Fed stepped into the breach and accepted these bad assets as collateral for loans. In March 2009, the Fed started to buy these assets outright in what was dubbed QE1. As a consequence of this qualitative and quantitative easing, the Fed's balance sheet almost tripled within a few months.[1]

How long would these extraordinary emergency measures be maintained? In March 2009, Ben Bernanke stated that the Fed had an exit strategy from its emergency credit policies. It could simply undo its credit policies and asset purchases, thereby reducing the size of its balance sheet to its precrisis level.

I have argued that such an easy exit option does not exist. The Fed's purchase of problematic assets did not solve the underlying real problems in the economy: injecting new money does not cause malinvestments to go away. By propping up financial institutions, necessary liquidations and readjustments of the structure of production are only delayed. QE1 could even cause more malinvestments and thereby aggravate the problem. The consequence could be a Japanization of the banking system, with insolvent banks held afloat by the central bank.

If the Fed would exit the emergency situation, reduce its balance sheet, and stop accepting problematic assets as collateral for loans, financial institutions would be back to the initial situation of September 2008. If housing prices do not return to their bubble level, many of the problematic assets will continue to be bad and not serve as good collateral. If valued at the market price, these assets might eat up banks' equity. If the Fed ended its emergency measures, we would effectively be back to the initial situation of frozen interbank markets and general illiquidity.

In October 2009, I concluded that the Fed could not go back to its initial balance sheet without causing the collapse of the financial system. One possible way out would be to reinflate the bubble. Rising asset prices — and especially housing prices — would make many problematic bank assets valuable again. The Fed could increase the quality of its assets by inflating the housing bubble.

In the winter of 2010, no one is talking about reducing the Fed's balance sheet or about exit strategies anymore. On the contrary, the Fed has chosen the path of more inflation and dubbed this strategy "QE2."

QE2 has a slightly different purpose than QE1. QE1 directly supported struggling banks by buying their problematic assets. QE2 supports the government.

The inflationary policies of the Fed have been coupled with the Keynesian fiscal policies of the US government. The US government engaged in deficit spending to bail out financial institutions and automakers, disrupting a fast liquidation of malinvestments and a smooth adaption of the structure of production to consumer wants.

QE2 is a direct response to this deficit spending, which obliges the government to issue more bonds. With QE2, the Fed supports the government by buying these bonds. The Fed thereby actively helps the government in its Keynesian policies, which disrupt recovery. While QE1 supported the financial system, QE2 supports the government. Granted, this difference is not substantial given that the fates of the financial system and the government are interwoven. The banking system finances the government that in turn grants the privilege of fractional-reserve banking and implicitly gives guarantees for banks' losses.

Of course, Ben Bernanke does not say that he wants to help finance the government's deficit via money creation. The official excuse for QE2 is, yet again, the scapegoat "deflation."[2] Price inflation is too low. James Bullard, president of the St. Louis Federal Reserve Bank, states that "it's important to defend inflation from the low side as we would on the high side."

In other words, if prices rise too slowly, we must print money so that things get more expensive faster. Bernanke even denies that QE2 would be inflationary: "One myth that's out there is that what we're doing is printing money. … The money supply is not changing in any significant way."

Bernanke plays a semantic trick in this statement. Of course, the Fed does not create the bulk of its new money by literally "printing." Rather, the Fed creates money by manipulating digits in its computer. When the Fed buys a $1,000 government bond from a bank, it transfers 1,000 new dollars as a payment to the bank. It is true that the Fed does not print the money and ship it over to the bank physically. Rather, it increases the account that the bank holds at the Fed by $1,000. It is more convenient to just create the new money in a computer.

However, the fact that the new money is created electronically does not mean that QE2 is not inflationary. QE2 is inflationary in several ways:

First, base money (bank reserves) increases. When the Fed buys a government bond, it creates money that it transfers to the bank selling the bond. At the end of the operation, the bank has more bank reserves and the Fed owns the government bond.

Second, the quality of money tends to decrease.[3] The average quality of assets that the Fed holds decreases when it buys government bonds. The percentage of gold of total assets that could be used in a monetary reform decreases, while the percentage of government bonds increases. Moreover, these bonds are for a government that is ever increasing its debts.

Third, prices will be higher than they would have been otherwise. Prices would probably have fallen substantially without QE1 and QE2. The injection of new bank reserves inhibited a credit contraction and falling prices. In fact, one aim of QE2 is to bid up asset prices.

Money flows into the stock market, bidding up stock prices. In March 2009, when QE1 started, the Dow Jones was below 7,000 and rose to 10,800 until QE1 expired. When the Dow fell below 10,000 again, markets began to speculate about the possibility of QE2, and a new rally started.

While the newly created money flows to asset-price markets, consumer prices might not surge strongly. But sooner or later, these investments will flow out of asset-price markets and start to bid up consumer goods' prices.

Fourth, the exchange rate will be lower than it would have been otherwise. Market participants will value the dollar lower, given that the base-money supply increases and the dollar's quality decreases. This devaluation is another aim of QE2. It is a way to give exporters an advantage. The devaluation is not as crude an instrument as a tariff but has similar effects. It makes consumers poorer. They have to pay higher prices for imported goods.

Consequently, QE2 is, despite Bernanke's words, inflationary. In fact, it is a euphemism to call the policy QE2. The term quantitative easing conceals the true inflationary nature of the instrument. Furthermore, it sounds technical. The added number "2" makes it even more so. People who know little about economics might ignore news on QE2. Why bother to understand something so technical — let the experts deal with it. The term also has a positive connotation. Who does not want "ease"?

As Walter Block has repeatedly pointed out, we should carefully watch our language. Language is crucial to clear communication. The use of the term quantitative easing generates a smog to hide the production of new money. Words, as Block states, can be mightier than pens or swords. They guide our thoughts and writings. The invention of the term quantitative easing prevents people from thinking about the consequences of inflation. The term distorts thinking.

Why not name QE for what it is? Why not name it after the effects it has?
"The term quantitative easing conceals the true inflationary nature of the instrument."
Money printing cannot make society richer; it does not produce more real goods. It has a redistributive effect in favor of those who receive the new money first and to the detriment of those who receive it last. The money injection in a specific part of the economy distorts production. Thus, QE does not bring ease to the economy. To the contrary, QE makes the recession longer and harsher.

The injection of new money into the economy reinflates old bubbles and generates new ones. Most importantly, QE facilitates government deficit spending — additional distortions and rigidities in the economy. Malinvestments can endure. Factors of production are not shifted to places where the consumer wants them to be most urgently.

Thus, QE2 would be better called, "Quantitative Straining," "Quantitative Destruction II," or "Crisis Prolongation III."

Or we might name it after the intentions behind it: "Currency Debasement I," "Bank Bailout I," "Government Bailout II," or simply "Consumer Impoverishment." Finally, we might also name it after its essence: "Money Printing I and II." Or, if we follow Bernanke, who pointed out that most of the new money is created in a computer, we can call it "Money Creation I and II." This might be the most neutral term.

The rhetorical tricks should not distract us from the fact that QE is simple money creation. The aim of Money Creation II is to finance government spending, debasing the dollar. We should dismiss the term QE and instead call money creation what it is: inflation.

Philipp Bagus is an associate professor at Universidad Rey Juan Carlos. He is the author of The Tragedy of the Euro.
See his website. Send him mail. See Philipp Bagus's article archives.

You can subscribe to future articles by Philipp Bagus via this RSS feed.

Notes:
[1] See Philipp Bagus and David Howden, "The Federal Reserve and the Eurosystem's Balance Sheet Policies During the Financial Crisis: A Comparative Analysis" in Romanian Economic and Business Review 4, no. 3: pp. 165–85.
Qualitative easing may be defined as a deterioration of the average quality of assets the Fed holds, while quantitative easing can be defined as an increase in the quantity of its assets.

[2] See Philipp Bagus, "Deflation: When Austrians Become Interventionists" in Quarterly Journal of Austrian Economics 6, no.4: pp. 19–35.

[3] See Philipp Bagus, "The Quality of Money," in Quarterly Journal of Austrian Economics 12, no. 4: pp. 22–45.