Let’s Catch Up with the Federal Reserve and QE2

December 29th, 2010

So the holidays have put a damper on the information channels of the Federal Reserve. Instead of the news being densely populated with stories of the economic stylings of the central bank, we’ve been hearing stories about Christmas shopping and snow storms. Enough of that, let’s get back to the crooked system so we can learn more about it in order to change it!

As most of you know the Fed announced their second round of stimulus (QE2) back in November, and according to recent articles it looks as though the $600 billion dollars will be dished out from now until June in order to decrease joblessness and push the economy into a more stable state. The first round of stimulus was “not enough”, so clearly the answer was to repeat an unsuccessful strategy yet again.

–Let’s take an early glance at the performance of QE2 and see if we are seeing signs of improvement. QE2′s initial goal was to lower rates, when in fact mortgage rates had risen after this round of stimulus was announced:

In early December, there was talk that QE2 wasn’t working because the so-called long bond, the 30-year government bond, was paying higher interest rates to investors — the opposite of QE2′s stated aim. Many mortgage rates are pegged to the long bond, so mortgage rates were rising.

–Another goal of QE2 is restoring confidence in the consumer. An act that has been pursued through the history of central banking: make consumers believe there is a silver lining through mainstream projections and they will act as though the silver lining was seen with their own eyes.

The Fed’s hope is that increased investment in stocks and corporate debt will generate a psychological boost that spills over into the broader economy, increasing spending and confidence.

–The Fed has talked constantly about decreasing unemployment, let’s take a look at how unemployment is doing.  As of , slightly down from the beginning of the year. The Bureau of Labor and Statistics has released an announcement on the new method of tracking unemployment. This will not be changing the realities of the job market, but will help economists more accurately provide unemployment statistics. So if we consider the drop in unemployment from January to November (1.3% difference), we can say the Fed is achieving their goal.  However, let’s not forget seasonal jobs for the winter which can have an effect on this statistic.

Bernanke is asking for collaborative efforts from both sides of the aisle, in building the system back up to a crash proof state, while others are waiting for the 2nd round of stimulus to perform much like the last.  His denial of “printing money” has effected his public reputation on his original mission of transparency.

Don’t forget, when January arrives so does the Ron Paul leadership of the House Financial Services Subcommittee. We’ll have all the latest when his much anticipated inauguration into the committee takes place.

Let’s keep our ear to the ground as more of this stimulus flows from the Fed and track the progress or damage it has on the economy. Stay focused everyone, don’t let TSA and Wikileaks get all your attention…we’ll be back to providing you the latest of Fed News into the new year. Thanks for staying tuned in!

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