Tag Archives: Quantitative Easing

Economy, Politics

Fed Chair Janet Yellen, Ralph Nader Trade Blows Over Interest Rates

Leave a comment

In October, five-time independent presidential candidate Ralph Nader wrote an open letter on behalf of Americans with savings and money market accounts to Federal Reserve Chair Janet Yellen criticizing the Fed’s near-zero interest rate policies. Yellen broke from the stoic tradition of Fed chairs in the past and directly responded in a letter to Nader.

In the open letter published by the The Huffington Post, Nader wrote:

[pull_quote_center]We are a group of humble savers in traditional bank savings and money market accounts who are frustrated because, like millions of other Americans over the past six years, we are getting near zero interest. We want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that we receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest. It doesn’t seem fair to put the burden of your Federal Reserve’s monetary policies on the backs of those Americans who are the least positioned to demand fair play.[/pull_quote_center]

[RELATED: Ralph Nader Blasts Huffington Post’s “Censorship” of Trump Political News]

He added, “We hear the Federal Reserve’s Board of Governors and the various regional board presidents regularly present their views of the proper inflation and unemployment rate, and on stock market expectations that influence their calculations for keeping interest rates near-zero. But we never hear any mention of us – the savers of trillions of dollars who have been forced to make do with having the banks and mutual funds essentially provide a lock-box for our money while they use it to make a profit for their firms and, in the case of the giant banks and large mutual funds, pay their executives exorbitant salaries… We are tired of this melodrama that exploits so many people who used to rely on interest income to pay some of their essential bills. Think about the elderly among us who need to supplement their social security checks every month.”

On Nov. 23, Yellen responded to Nader with a letter of her own, in which she blamed the “hardship” suffered by savers and “particularly seniors on fixed incomes” on what she described as a “continuing aftermath” of the 2007-2008 financial crisis and the “severe recession that followed.”

“It may help to review a few basic facts,” Yellen lectured. “These lower borrowing costs for millions of American families and businesses helped support asset prices—including home prices and, as you note, stock prices. More importantly, by making consumer purchases more affordable and encouraging businesses to invest, low interest rates supported the economic recovery and the creation of millions of jobs.”

“Would savers have been better off if the Federal Reserve had not acted as forcefully as it did and had maintained a higher level of short-term interest rates, including rates paid to savers? I don’t believe so. Unemployment would have risen to even higher levels, home prices would have collapsed further, even more businesses and individuals would have faced bankruptcy and foreclosure, and the stock market would not have recovered,” she wrote.

[RELATED: Trump: Fed Chair Yellen Not Raising Rates ‘Because Obama Told Her Not To’]

Nader’s open letter controversially suggested that Yellen consult her Nobel Prize winning economist husband George Akerlof on interest rate policy, a move that many observers interpreted as a sexist gaffe.

Slate’s Jordan Weissmann, who described Nader’s comments as “gross mansplaining,” wrote, “So, why is Yellen taking time to respond to a man who hasn’t been politically relevant for 15 years? This is purely speculation, but I don’t really think Janet Yellen cares all that much about Ralph Nader. But the man’s criticisms of the Fed just happen to closely mirror arguments made by some conservatives, who have made bashing the central bank a major economic theme of the GOP primary. So Nader’s letter gives her an excuse to very pointedly respond in writing to their accusations without looking too overtly political. Or maybe the woman just really took umbrage at that husband line.“

Economy

Peter Schiff: Wall Street Questions The Federal Reserve Narrative

Video 1 Comment

On Monday, the Dow was under some pressure, down 170 points at the time of recording. That’s on the back of breakdown in European talks with Greece over the weekend. This is the lowest I’ve seen the Dow since early May. We’re at 17,730-is. We were above 18,000 not too long ago. We’re just about flat. We’re down maybe close to 100 points on the year. But there is a lot of room for the market to decline as long as Federal Reserve rate hikes are on the table.

The Fed is going to be meeting. It’s Open Market meeting begins Tuesday. It ends on Wednesday. Remember, for a long time everybody thought that June was when the Fed was going to announce their first rate hike. Although, when the year began, I think people were divided between they would hike in March or in June. Of course, I said that they wouldn’t hike at all. Now even most of the June camp as thrown in the towel. I think that the consensus is that the Fed is going to hike rates in September. But I think, as we get through July and August, and the weak economic data continues to roll in, we are going to continue to push back those rate hike estimates maybe to December.

But, of course, if they don’t raise rates in December, why are they going to raise them in 2016? I think 2016 could be a weaker economic year than 2015, which sequentially will be down from 2014. And it will also be an election year. So if they couldn’t raise rates in 2015, why would they do it in 2016 when you have all of that political backdrop that is clouding decision making. Of course, the Fed doesn’t want to be seen as trying to influence the elections, or help or hinder any particular party. So they may decide to be neutral.

Of course, there are a lot of other reasons why the Fed is not going to be raising rates. In fact, I think they’re going to be launching the fourth iteration of its quantitative easing program. In fact, I’m not the only person thinking that. Wall Street questions the Federal Reserve narrative.

Tune in to the full podcast episode above and listen to more episodes of Peter Schiff Radio here at Truth In Media.

Politics, US

Fmr. Head of Fed Reserve QE Program Confesses The Program Is Nothing More Than Wall Street Welfare

7 Comments

Story by Sonya Sandage and Ben Swann

“I’ve come to recognize (Quantitative Easing) for what it really is: the greatest backdoor Wall Street bailout of all time”, writes Andrew Huszar, former head of Federal Reserve QE program in a stunning “confession” in the Wall Street Journal this week.

Consider the fact that up until 2008, virtually no American was aware of the economic term, Quantitative Easing. QE, as it is called by media is the Federal Reserve Bank’s policy of bond purchases in order to support bond prices. Bond buying via Fed Open Market Committee is a typical practice, but the $4 Trillion in QE we’ve seen over the last five years is anything but typical.

The Fed essentially is printing $85 Billion per month, out of thin air, using that digital money to buy bonds up, and trade them out with cash reserves or ultra-short term notes. Banks and hedge funds that owned the original bonds are then supposed to pump that money into the economy, creating a virtuous cycle.

What we now know, five years after the start of QE1, is that Quantitative Easing does virtually nothing to improve the U.S. economy. The reason for that is actually pretty simple, most of the loose money courtesy of Fed printing is being reinvested into even more bonds, as well as derivatives and stocks.

It’s not being invested in creating new businesses, or significantly increasing lending. The $85 Billion per month is not being reinvested into biomedical research, tech, space exploration, or really anything innovative that will create economic growth. This does not help the common man, aka Main Street. It does help investors, including 401(k) and IRA owners, and has made them richer than ever in their accounts. If there is a major market correction when a taper does start though, those gains could evaporate.

So what is the QE policy all about? According to Huszar, again the former head of Federal Reserve QE program, Quantitative Easing is really nothing more than Wall Street welfare.

“It has allowed QE to become Wall Street’s new ‘too big to fail’ policy.” writes Huszar.

Huszar goes on to write, “Unless you’re Wall Street. Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.”

Long have critics alleged the policy is actually designed to prop up the balance sheets of the very same “Too Big to Fail” banks that caused the financial crisis by deregulation of Glass-Steagall, and irresponsible gambling in derivatives, as well as outright fraud.

To read the full confessional piece by Andrew Huszar, click here