Monday, February 28, 2011
QE3? You've got to be kidding me...
The end of QE2 is still several months away and yet quite a few top Federal Reserve officials are already hinting that more quantitative easing may be necessary. Apparently the U.S. economy is not moving forward as rapidly as they would like. So it looks like "QE3" could be on the way. But did anyone out there actually believe that quantitative easing would come to a complete stop in June? Whether they call it "QE3" or something else entirely, the reality of the matter is that we have now come to a time when the Federal Reserve is going to be continually purchasing a significant percentage of all new U.S. government debt. This is essentially a gigantic Ponzi scheme, but sadly there is just not enough money in the rest of the world to be able to continue to feed the U.S. government's voracious appetite for debt. Right now Ben Bernanke and his cohorts are trying to break the news to us gently, but anyone with half a brain can see what is happening. The only way for the game to keep going is for the Federal Reserve to print lots more money, and that is going to be incredibly bad for the U.S. economy in the long run.
The other day James Bullard, President of the Federal Reserve Bank of St. Louis, made national headlines when he declared that Fed officials should "never say never" when it comes to QE3 and more quantitative easing. But the truth is that other Fed officials have been dropping public hints about the "need" for QE3 for several weeks now...
So how in the world did things get to the point where the Federal Reserve feels forced to recklessly print gigantic piles of money?
Well, it didn't happen overnight. Back during the 1980s and 1990s there were many people that desperately tried to warn about what would happen if U.S. government debt was not brought under control.
Unfortunately, our politicians did not heed those warnings.
Today, the U.S. national debt has reached a grand total of $14,137,541,098,872.71. It is 14 times larger than it was just 30 years ago. It is the largest single debt in the history of the world.
So why don't our politicians just balance the budget now so that we don't keep having to borrow so much money?
Well, there are some huge problems. First of all, when you combine entitlement programs such as Social Security and Medicare with interest on the national debt, it comes to approximately 64 percent of all federal government spending.
But that is not the bad news.
In the years ahead, entitlement spending and interest on the national debt are both projected to absolutely explode.
We are rapidly approaching a time when spending on entitlement programs and interest on the national debt will be significantly greater than all of the revenue that the federal government brings in each year. All federal revenues will be spoken for even before a single penny is spent on defense, education, running the government or anything else.
Either entitlement programs are going to have to be seriously reformed or the U.S. government is going to have to come up with a massive amount of extra money from somewhere or the U.S. government is going to have to borrow increasingly large piles of money from someone.
Unfortunately, there are no easy solutions and most of our politicians are scared to death to touch entitlement programs because it will mean that they will lose votes...