QE2, or the second round of government money printing, ends next month. From January to June, the Fed added $100 billion to the money supply through “open market operations.” Obscurantist jargon aside, this means that the Federal Reserve under Bernanke swapped out fixed income products for fungible cash to the tune of $600 billion. This was supposed to add liquidity and spur lending, and has arguably failed on all counts.
The Fed, for its part, remains dedicated to its Zero Interest Rate Policy, or ZIRP for short. We learn from the Financial Times:
Discussion of exit strategy shows how debate on the Federal Open Market Committee has turned towards tightening of monetary policy rather than further easing. But the FOMC noted the discussion “did not mean that the move toward such normalisation would necessarily begin soon”.
This is so predictable that it’s hardly news.
The idea behind low interest rates, of course, is that they spur lending, borrowing, investment, and eventually hiring. This is the lesson Bernanke learned from Greenspan’s low rates; not that the bubbles they created were economically disastrous, but that low rates stimulate.
If I may suggest an alternate cure? Savings. Yes, savings – thrift. Reduced consumption. You encourage savings, of course, by offering attractive incentives for creditors. The most attractive thing to a creditor is a good rate of return; put another way, a high interest rate. Let’s review a simple example – my savings account. The interest rate as of today is 0.80% annually. How does this compare with a hypothetical rate of 4.8%, which is what the account was offering in May 2006?
Assume $1,00o is used to open a new savings account, and the saver contributes $100/month. What’s the worth of that account in 4 years time*?
- with rate of 0.80%: $5,908.88
- with rate of 4.8%: $6,507.94
That’s an increase of $599.06, or 10.1%. (Thank you, compound interest.) The teachable moment, you might have guessed, is that people are more likely to save when they are offered a greater reward for saving! High interest rates indicate that reward is available to the frugal.
For something to be loaned, it must first be saved; this is axiomatic. If you adopt the position of the U.S. government, that is, our economy needs more lending, you must also accept that the first order of business to encourage more savings. The simple example above demonstrates that high interest rates are therefore the first necessary step to establish ample credit on the market, and not the bogeyman that the Fed would have us believe. Keep this fact in mind when your government tells you that a zero interest rate policy is ameliorative to our economy. And then ask them why it so happens that in the process of driving down interest rates, they are buying back their own debt through inflation.
Am I saying that the government is acting in its own best interests? That’s a lesson even the Libs can learn.
*interest compounded monthly
(Events are likely unrelated.)
WASHINGTON (MarketWatch) — The number of people who filed new applications for jobless benefits leaped 43,000 last week to 474,000, the highest level in almost nine months. A Labor official attributed much of the increase to temporary layoffs in the auto sector and in the state of New York, where workers in the educational field such as bus drivers are eligible for compensation during the week of spring break. Economists surveyed by MarketWatch had expected claims to fall to seasonally adjusted 412,000 from the prior week’s revised level of 431,000.
Yes, it appears that our job market is “double-dipping.”
Meanwhile, President Obama will be at the WTC site today, meeting with families of 9/11 victims. The coverage of the death of bin Laden has been so botched by this White House that it remains unclear exactly how events unfolded, including such details as to whether bin Laden was armed or merely “resisting,” whether he used a woman as a human shield, and even as to who shot him.
Obama has now decided that releasing bin Laden’s death photo would incite the terrorists, contradicting C.I.A. Chief Leon Panetta’s previous statement that the photo would be released. No word from Obama on what incited al Qaeda to commit heinous acts of terrorism before Saturday’s strike.
Today was a great day for the great United States of America, we finally got the man who is responsible for the 9/11 attacks as well as many attacks on American soldiers and civilians. Osama Bin Laden is no more. For too long he was hiding from the United States. For too long, he sent out threatening messages to United States and it’s Allies. And for too long he and his organization Al-Qaida launched attacked on America and it’s Allies.
But thanks to our Navy SEALs and CIA, Osama got destroyed and Americans should be happy, enjoy this great day that we all are celebrating.
What we really all need to realize is that despite the fact that Osama Bin Laden is no more, the Taliban, Al-Qaida, and other terrorists throughout the globe still operate in plans to destroy The U.S., it’s allies, and others that stand in its way. The Taliban are still around, trying to regain all of Afghanistan, Al-Qaida while weakened over the last few years is not out for the count and are trying everything they can to start more attacks again, and there are many homegrown terrorists in the U.S. and other western countries ready to launch terrorist acts against civilians and military targets.
Osama Bin Laden is no central head where taking him out takes out Al-Qaida and all other terror cells. When you have cells that act like splinters, taking out the leader at best takes out or damages the splinter cell. Obama was just another splinter, and Al-Qaida has been more of a bunch of splinter groups for the last several years since Osama was in hiding.
For America, the West, and anyone else who wants to take out Al-Qaida, the Taliban, and other terrorists groups, the most important thing now is to keep going and going. No, point of stopping now, it’s time to continue taking out the enemies of the America and the West. They won’t stop, they won’t play nice, why should we?
Talk radio has traditionally been a medium through which conservatives communicate. The liberals might control the “papers of record” (the NYT and Washington Post, the left’s equivalent of Bibles) the weekly news magazines (think Time and Newsweek which all-but-official Obama propaganda mills, or more recently offer apologia for his failed policies), and Oprah.* But conservatives continue to dominate the most democratic of all media, radio.
A friend of mine recommended a radio host to me this past week. His name is Doug Urbanski, and is available on 970 AM in New York. You can visit his website here:
Like other great conservative talk show hosts, he sticks to big issues like the sham of anthropogenic global warming, Obama’s radical Marxism, and the underhanded, despicable tactics used by today’s left (accusing opponents of racism and bigotry, lying to the American public, obscuring true intentions, etc.).
Give him a listen and hear what he has to say!
* Thankfully, the Times, Washington Post, Newsweek, and Time are all going the way of the Dodo. You’d think after the grand failure of Air American the leftist capitalists (an oxymoron?) would learn, but apparently not.