“The Fed no longer denies that the purpose of its latest bond purchases is to drive up Wall Street

[girl gone mad]

“The Fed No Longer Even Denies that the Purpose of Its Latest Blast of Bond Purchases … Is To Drive Up Wall Street"
George Washington
http://www.nakedcapitalism.com

The stated purpose of quantitative easing was to drive down interest rates on U.S. treasury bonds.

But as U.S. News and World Reported noted last month:

By now, you’ve probably heard that the Fed is purchasing $600 billion in treasuries in hopes that it will push interest rates even lower, spur lending, and help jump-start the economy. Two years ago, the Fed set the federal funds rate (the interest rate at which banks lend to each other) to virtually zero, and this second round of quantitative easing–commonly referred to as QE2–is one of the few tools it has left to help boost economic growth. In spite of all this, a funny thing has happened. Treasury yields have actually risen since the Fed’s announcement.

The following charts from Doug Short update this trend:



http://www.nakedcapitalism.com/">more...

[Joanne98]

1. QE2 is driving up the stock market too!

[dkf]

3. The rally started with the Fed hinting at QE2.

I think it was Bill Gross or El Arian who said the Fed was trying to move the market towards stocks as they believed we could not adequately grow without a vibrant stock market.

[Kolesar]

2. Does that mean that Bernaike should *not* have done quantitative easing?

Did the "fed chairman" have any power to address the "structural problems of the economy"? I wish he did.

NakedC article:

The Federal Reserve’s quantitative easing programs have helped stock market participants, financial institutions, and large companies but have done little to address the structural problems of the economy, according to TrimTabs Investment Research.

[jtuck004]

4. He could have advised the president that demand is the most important

thing, that there is over a decade of demonstrable job loss under de-regulation and lower taxes for the very wealthy, that econmics mostly trickle on, not trickle down. Tell him the way back to a good economy was not going to be enriching the investment banks that made such large donations to the 2008 campaign, but encouraging the congress to join him in putting 15 million people to work over the next 3 years. Have to figure out a way to educate them so they don't just buy tv's and make other nations wealthy, work toward the future and all that. but doable.

He could have said "Sure, I'll do this, but it will just increase the inequality of income, 2% of the population will do increasingly better while the rest fade. The 30 million underemployed (on average) people will increase, as will the 40 million with not enough food and the 50 million with no healthcare.

He didn't need to go out and build a factory. Just not assist very wealthy people to avoid loss while ignoring his first mandate, that of full employment, when it conflicts with their new, uh, mission.