Our American
government initiated QE3 back in September 2012 to stimulate job growth
via "deficit spending". The Federal Reserve's QE3 game-plan is to
expand the money supply by purchasing mortgage backed assets as
collateral - at a rate of a thousand million dollars per day
indefinitely! Our govt. does all the deficit spending while Americans
are stuck with the bill.
QE3 won't work and here's why:
Deficit spending via monetary inflation(QE3) will only stimulate job/economic growth temporarily until the National Debt becomes too big to service. That's because deficit spending merely adds on more debt than you already had before. So this newer debt(QE3) eventually ends up servicing the old debt leaving less currency to circulate in the economy. This is known as monetary deflation. This contraction of the money supply means less cash for Americans to buy new shoes & gadgets that facilitate job creation and real economic growth. How can we grow the net worth of the American economy while growing new debt alongside of it? The truth is that we can't. For real economic income/net worth to happen we first must not create new debt. Secondly, we must pay down our old debt. This is called a balanced budget.
For an example: let's say that you have a credit card debt. Your income must be high enough to service that debt while you still have plenty cash leftover for you to participate in our economy by buying new gadgets and buying coffee at Starbucks. If your credit card bill is your biggest expenditure...then you my poor friend are officially bankrupt! Maintaining your lifestyle through borrowing only digs you deeper into debt,corrodes your net worth, and leaves you with less disposable income in the future.
Conclusion: QE3/monetary inflation/deficit spending ultimately leads to the ballooning of our National Debt and will fail to boost our economy. Servicing old debt with newer debt will ultimately lead to contraction of the monetary supply. Monetary deflation leaves less cash in circulation for Americans to maintain their healthy lifestyle. How will "helicopter Bernanke" prevent monetary deflation? QE4 in 2013 of course! QE4 will lead to price inflation via flooding the market with more consumers who are all chasing the same finite amount of goods & services. More competition for finite resources mean higher prices.
QE3 won't work and here's why:
Deficit spending via monetary inflation(QE3) will only stimulate job/economic growth temporarily until the National Debt becomes too big to service. That's because deficit spending merely adds on more debt than you already had before. So this newer debt(QE3) eventually ends up servicing the old debt leaving less currency to circulate in the economy. This is known as monetary deflation. This contraction of the money supply means less cash for Americans to buy new shoes & gadgets that facilitate job creation and real economic growth. How can we grow the net worth of the American economy while growing new debt alongside of it? The truth is that we can't. For real economic income/net worth to happen we first must not create new debt. Secondly, we must pay down our old debt. This is called a balanced budget.
For an example: let's say that you have a credit card debt. Your income must be high enough to service that debt while you still have plenty cash leftover for you to participate in our economy by buying new gadgets and buying coffee at Starbucks. If your credit card bill is your biggest expenditure...then you my poor friend are officially bankrupt! Maintaining your lifestyle through borrowing only digs you deeper into debt,corrodes your net worth, and leaves you with less disposable income in the future.
Conclusion: QE3/monetary inflation/deficit spending ultimately leads to the ballooning of our National Debt and will fail to boost our economy. Servicing old debt with newer debt will ultimately lead to contraction of the monetary supply. Monetary deflation leaves less cash in circulation for Americans to maintain their healthy lifestyle. How will "helicopter Bernanke" prevent monetary deflation? QE4 in 2013 of course! QE4 will lead to price inflation via flooding the market with more consumers who are all chasing the same finite amount of goods & services. More competition for finite resources mean higher prices.
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