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What the Fed's action means for your finances

By Neil Irwin

The new action announced Wednesday by the Federal Reserve Board to try to strengthen the faltering economy by buying $600 billion in government securities has major implications for the country as a whole. The bond purchase program, known as quantitative easing, is aimed at reducing the stubbornly high unemployment rate. (See this interactive graphic for a breakdown of Fed strategy.)

But what does the announcement mean for your personal financial situation? Here are the key things to know:

  • If you are thinking of buying a house or refinancing a mortgage, the new action helps you. The Fed is pumping money into the economy by buying Treasurys, which has already pushed down long-term interest rates, including for mortgages.
  • If you have significant investments in the stock market, it helps you. Lower interest rates on bonds have already prompted investors to bid up stock prices.
  • If you live on a fixed income, such as a pension that does not adjust for inflation, it hurts you. Part of the Fed's goal is to push inflation a bit higher than its current ultra-low rate of around 1 percent. In effect, higher prices without inflation adjustment shave off real income.
  • If you rely on interest payments as a major source of income, it hurts you. Lower interest rates cut cash flow for Americans who live off payments from bonds, CDs or other fixed-income investments.
  • If you travel abroad frequently, or consume lots of imported goods, it hurts you. In anticipation of the Fed's effort to reduce long-term interest rates, currency investors have been selling off dollars in recent weeks. So, the dollar has already weakened relative to other major currencies.

By Neil Irwin  | November 3, 2010; 2:25 PM ET
Categories:  Federal Reserve  
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Next: Sizing up the Fed's plan to boost the economy

Comments

So it hurts more than it helps...Thank you...great plan.

Posted by: Anonymous | November 3, 2010 3:07 PM | Report abuse

How much of the dollar's purchasing power has to be stolen by the Fed before it is within the sphere of 'self-defense' that someone takes action in stopping this insanity if not the perpetrator?

Posted by: Anonymous | November 3, 2010 3:09 PM | Report abuse

Join the R3volution, AUDIT THE FED. A complete and through audit.

Posted by: Anonymous | November 3, 2010 3:15 PM | Report abuse

Again, the banks and corporation's government at work. No cost of living increases, but the cost of living is increasing. Insurance companies have inflation increases built into their policies and they increase rates even if there is no inflation. Why "because we can." If the united states would stop murdering in other countries, nothing else would be relevant. It would all go away.

Posted by: linda_521 | November 3, 2010 3:25 PM | Report abuse

So again and as always, this helps people with money and not the ones that struggle and doesn't have money to put in to investments and portfolios. It is nothing but starving the poor to death. The Government by the people for the people is now the Government by the corrupt for the rich.

Posted by: Anonymous | November 3, 2010 3:33 PM | Report abuse

Fed to old folks: drop dead.

Fed to young folks: speculate.

Posted by: rusty3 | November 3, 2010 3:37 PM | Report abuse

Bernanke belongs in jail with Bernie Madoff. Both are scam artists of highest order.

For anyone who has a shortage of brain cells, do a quick Google search on the history of fiat currencies. You might also want to look up the Weimar Republic and Zimbabwe.

Posted by: John991 | November 3, 2010 3:42 PM | Report abuse

I have a whole lot of problems is trying to refinance when my house is under water! Keep in mind, I actually put 20% down when I bought it.

Posted by: ADmom | November 3, 2010 3:43 PM | Report abuse

200 years go we, the "small" people; would have stormed the Capitol and beheaded these fat selfish thievs.

Posted by: Anonymous | November 3, 2010 3:44 PM | Report abuse

If they took these 600 Billions and divided it up to each and every American citizen over the age of 18 not making 250K/year, this economic downfall would end tomorrow.

Posted by: Anonymous | November 3, 2010 3:46 PM | Report abuse

Republican or Democrat, it does not matter what so ever. This country is run and operated by the rich and big corporate America (which are the rich to being with) and their lobbyists anyhow; and we all know it. The old days where an American was an honest hard working man/woman is way behind us, all that there is left is this fat decease filled disgusting person with an expensive foreign car and a wallet full of unearned money. She/he has it all….. Except pride and honor.

Posted by: Anonymous | November 3, 2010 4:01 PM | Report abuse

Hey Anonmous, while you are ranting to high heaven, why not run spell check, you moron? Obviously, you would benefit from some added education!

Posted by: Anonymous | November 3, 2010 4:24 PM | Report abuse

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: Account overdrawn.” Ayn Rand, Atlas Shrugged

Posted by: Anonymous | November 3, 2010 4:27 PM | Report abuse

No one calls out Ben Bernanke like Denninger!!

America better get educated FAAAST, while there is still something of our nation to save.

STOP THE MANIPULATION, BRING BACK OUR FREE MARKETS--- Houses are just being propped up at insanely artificial levels---it is a horrible time to buy!!

http://market-ticker.org/

Posted by: misssymoto | November 3, 2010 4:51 PM | Report abuse

Our government truly has been effectively CAPTURED. We used to be a nation of laws that has been reduced to being run into the ground by a criminal syndicate---

WHERE are the lawyers?? WHERE are the cops?

Posted by: misssymoto | November 3, 2010 4:53 PM | Report abuse

Terrific, so if I want to buy a house that is still overpriced by at least 20%, which does not have a clear title, (thanks to (Fraudclosure"), I may be able to save 1/4 of a percentage point. Woohoo! Let me have two!

Otherwise, I'm completely screwed like the rest of the serfs (non-Banksters).

I can't wait for Ron Paul, new chairman of the Monetary Policy Subcommittee, gets Bernanke in front of him. Hopefully he will bring impeachment charges against this lying scumbag.

Posted by: Anonymous | November 3, 2010 4:54 PM | Report abuse

Thank you, Neil, for this cogent explanation almost everyone can understand.
Why are they growling?
They voted for this.
Interesting the Fed took this action immediately AFTER the election, not before.
Were they playing "I've got a secret"?
And then they wonder why we hold them in such low regard.

Posted by: Anonymous | November 3, 2010 5:11 PM | Report abuse

1% current inflation, are you joking. Instead of being a sounding board for the government do some real reporting along with real investigations. No wonder no one believes in the MSM any longer.

Posted by: Anonymous | November 3, 2010 5:14 PM | Report abuse

I don't see how it hurts more than it helps. The value of the dollar will decline. American workers will become more competitive. More goods and services will be provided by Americans. The jobs that leaked overseas because of the overvalued dollar will come back here. Do you people want to reduce unemployment or not? (By the way, I'm retired.)

Posted by: haphar1 | November 3, 2010 5:24 PM | Report abuse

Hate to tell you, retired dude, the jobs didn't "leak overseas" because of the "overvalued dollar." They were taken overseas by greedy corporations who realized they could earn more profits using Chinese workers who they only had to pay $1/day. You really think devaluing the dollar by 20% or so is going to bring those jobs back??? How many people in this country will work for $1.20/day??? Would you?

But in the hands of the banksters, that extra free money from the Fed will soon be chasing commodities (whose prices are already rising at an alarming rate). Wait until you are paying $8 for a gallon of gas and $10 for a loaf of bread and tell me Bernanke's policies don't hurt.

Posted by: Anonymous | November 3, 2010 5:31 PM | Report abuse

Does this mean that we are printing more money to buy our own debt? And if that is the case won't that devalue the dollar? And if we devalue the dollar everyone who has saved loses. The new congress needs to act as quickly as they can to stop this stupidity.

Posted by: tonyjm | November 3, 2010 5:46 PM | Report abuse

Something better be done by the Dems or Republicans to help the people who live on social security. This will be the second year in a row that there will not be a cost of living increase. How can this be justified when everything has gone up in price including gas, food, clothing etc.
Maybe the "say NO" Republicans can figure out a way to solve this problem.

Posted by: marlene77 | November 3, 2010 5:59 PM | Report abuse

The analysis didn't mention that it will result in higher gasoline prices and higher prices for heating fuel, along with other commodities--gold and other precious metals, food, etc.

Posted by: Anonymous | November 3, 2010 6:18 PM | Report abuse

It means hyperinflation, another government created train wreck for the middle class, as the smug morons in Washington make another insane attempt to rescue their failed free trade fantasies.

Posted by: mibrooks27 | November 3, 2010 6:26 PM | Report abuse

It makes anyone who's assets are denominated in dollars (all of us) poorer in relation to the rest of the world. Thanks for nothing!

Posted by: Tyler20 | November 3, 2010 6:35 PM | Report abuse

Add to the list:

If you are a net debtor, than you will gain from repaying your debts in cheaper dollars. If you are a net saver, you will lose since your savings will buy less later when you wish to spend them, like during retirement. The prudent and thrifty will be punished and the spendthrifts will be rewarded.

The Stock market may see a run up in prices as investors put money into the market as a hedge against inflation. On the other hand, the threat of instability due to the inability to predict the rate of inflation and the reaction of interest rates may cause businesses to sit out the recovery, causing stock prices to fall after another bubble. Inflation should also cause house prices to increase too, but if interest rates rise to account for inflation, than home prices may fall even further as potential buyers are unable to meet the increased monthly mortgage payments due to higher interest.

Buy Renminbi and invest offshore, the dollar is going to be obsolete, and needs to be replaced with a coin about the size of a present day penny, and probably made of aluminum, that can be fed by the handful into vending machines and parking meters.

Posted by: droberts57 | November 3, 2010 7:14 PM | Report abuse


The Alpha Strategy

thealphastrategy.com

It explains in an easy to read format why things are the way they are economically and politically speaking and it has sound advice for people making less than 40K a year and what to do if you have more.

Posted by: Anonymous | November 3, 2010 7:43 PM | Report abuse

If you're being responsible and are saving for your retirement, it HURTS YOU. As higher inflation will make your saved dollars worth less.

If you have children, it HURTS THEM. As the value of the dollar falls, the cost of everything will correspondingly go up.

If you're part of the banking and financial system, this HELPS YOU. Because you get these new dollars first, before they lose their value.

This is not a sustainable system. We need to return to a commodity-backed dollar (i.e. gold or silver). Throughout history, empires supported by a fiat monetary system (such as what the U.S. is currently using) have ended in the demise of those empires.

The U.S. will be no different.

Posted by: Anonymous | November 3, 2010 7:45 PM | Report abuse

Just a mere 600 more billion in the toilet.

Helping big business and the financially well-off and sticking it to the working people.

Social engineering at its finest.

Posted by: veerle1 | November 3, 2010 7:58 PM | Report abuse

Atten: N.Irwin. Re: Your column of 11-03-2010 on Fed's action in buying 600 Billion dollars in Gov't securities. In ordinary circumstances, this action would result in reducing the value of the doillar, an effect that is normally referred to as inflation.
The resulting affect is to increase the the cost of a loaf of bread, or a gallon of gasoline,
as happened during the days of President Nixon. All we can do is watch and wait, and hope the Gov't
can reverse its program before it gets out of control.
Cyrano is clutching his wallet tightly. Signed: Cyrano.

Posted by: Anonymous | November 3, 2010 9:03 PM | Report abuse

If the consensus of the world's investors is the FED is taking the Weimar Republic route out of its difficulties causing a stampede out of the dollar, and interest rates spike, you could conceivably end up getting a free house in Woodbridge with every fill-up of ten gallons or more. That is, if the station is by then allowed by law to sell you ten gallons or more at a time--a big if.

Posted by: slim21 | November 3, 2010 9:09 PM | Report abuse

In the long run, this is a HUGE gamble. As our dollar becomes cheaper, the cost of imports will raise causing inflation at home. How far will the dollar fall? How high will imported goods like oil; rise? Buying back our debt in this manner is a Las Vegas gamble. We need to cut government spending and come close to balancing the federal budget.

Posted by: RayK1 | November 3, 2010 9:22 PM | Report abuse

@ Anonymous @454PM (And all the other Fed-Haters out there)

Governors of the Fed cannot be impeached or removed from office for their policy views. Also, please note that Bernanke was nominated by George W Bush and approved by a Republican controlled Senate.

Chapter 3/Title 12 of US Code:

http://is.gd/gGR3e

Posted by: Zelwyn | November 3, 2010 9:38 PM | Report abuse

Can the Fed governors be impeached for committing perjury? Bernanke's has done that repeatedly (such as "I have no intention of monetizing the debt" - seems to me that is exactly what he's done. The Fed intends to buy all the goverment debt issued in the nest year.

Posted by: Anonymous | November 3, 2010 10:02 PM | Report abuse

Having had Republicans working very hard for two years to do nothing, on Election Day we passed along the House majority to them. Let's see what they can do. If it is a tenth of what the Democrats were able to do alone, I will stop complaining. The ball now, and once again, is in the GOP's court. The difficulty, of course, is that they are the party that supports business in any way they can. This Fed move seems to be right down their alley.
We got in this mess after a decade of GOP policies. Bernanke, you remember, is a Republican, nominated and crowned by a GOP administration. We gave Obama two years of trying to fix things. Now we hand the House back to the GOP. I never would've thought that Americans are so stupid as to vote against their own best interests. No wonder the world laughs. Soon we won't be able to borrow from anybody. What then?

Posted by: Anonymous | November 4, 2010 12:48 AM | Report abuse

This categorization of "how it helps you, how it hurts you" is an encapsulation of the greed that has permeated our formerly civil society. The question should only be "how does this help your country's future". In my opinion, federal spending and federal reserve pump priming are a pair of arms for lifting a dangerously faltering economy. Tax cuts and easement of federal regulations can also help to stimulate the business climate. But these moves will be most effective if the background spirit of citizens becomes less selfish and more forward conscious of the needs of the whole nation. Follow the golden rule. Do unto others as thou wouldst have others do unto thyself.

Posted by: Anonymous | November 4, 2010 12:56 AM | Report abuse

The Republicans have had two years to fine tune their recovery plan so there will be plenty of jobs in the next few months.

Ben will need to keep track of where his money goes. This is a major problem with government, they believe in the invisible hand and not metrics. There are no invisible hands in business, only metrics.

Posted by: Beacon2 | November 4, 2010 4:17 AM | Report abuse

So those of us who don't live on borrowed money will continue to see our assets devalued. You are going to make it easier for big banks and corporations to borrow huge amounts of money and sit on it. Corporations are already sitting on $1 trillion in cash and won't spend a dime on new jobs, new plants, or research and development. They just sit on their golden egg. Thanks for all the help, Ben.

Posted by: Rob20 | November 4, 2010 7:09 AM | Report abuse

@ anonymous-3:46 11/03/10

This downfall would not end by distributing evenly the $600 Billion. That would only provide a little over $2000 to each citizen,as there are currently 307,006,550 people in the US.

The only way to solve this crisis is to put an end to capitalism.

Posted by: Anonymous | November 4, 2010 7:53 AM | Report abuse

I agree with so many of the comments being posted but I wonder, How many of the people on this thread actualy voted against that person that is leading our country (not worth putting his name down)? I did and I am proud of that fact. I'm also proud for those of us who went out and voted this week to make our voice heard. All I am am saying is if you didn't vote or you voted for these fools, then you have no reason to be complaining. I'm hurting because of these decisions just like many (okay most) Americans are but I did something about it.

Posted by: Anonymous | November 4, 2010 7:57 AM | Report abuse


So it hurts more than it helps...Thank you...great plan.

Posted by: Anonymous | November 3, 2010 3:07 PM

=================

The great plan is that the Republicans want to lower the taxes of the people it helps and raise the taxes of the people it hurts. Also knowing as "flattening the tax curve". Perhaps I'll take my dogs to the doggy day care center so you can have a job. I would be one of those "job creators". LOL

Posted by: Anonymous | November 4, 2010 8:50 AM | Report abuse

Interesting glitch on the comments section. We're all "Anonymous" or "Anonymous" is bi-polar. Where's the lithium when you need it.

Posted by: James10 | November 4, 2010 8:54 AM | Report abuse

We are all anonymous and the country is bipolar.

Posted by: shrink2 | November 4, 2010 9:08 AM | Report abuse

Helping Wall Street, not Main Street. Obama's allegiance is to BIG BANKS, who own him, not the common people. He just doesn't get it.

Posted by: augwest77 | November 4, 2010 11:20 AM | Report abuse

One could think this is aimed to help those with wads of cash with which to play forex "games" that can make or break national economies and national banks. Too bad those on fixed incomes, those without spare cash to play forex games (i.e., 99.999% of the general population), etc. suffer. It's like the economic lessons are coming from Zimbabwe (post-1980) and the Weimar Republic. Brutal.

Posted by: frankensundae | November 4, 2010 12:07 PM | Report abuse

I know a way the government can raise a lot of money. Auction off the oppurtunity to punch Bernanke in the face. One shot per person as hard as possible. It'll raise trillions and we'll all feel a lot better.

Posted by: peterg73 | November 4, 2010 12:29 PM | Report abuse

I feel sorry for all of the elderly who live on Social Security who have not received a COLA increase in their soc sec checks in two years, while inflation has increased by 6% in some areas each year. Particularly foodstuffs and medicine.

Posted by: jfregus | November 4, 2010 1:15 PM | Report abuse

For: Anonymous | November 4, 2010 7:53 AM

"This downfall would not end by distributing evenly the $600 Billion. That would only provide a little over $2000 to each citizen,as there are currently 307,006,550 people in the US"

Really, there are 307,006,550 people over 18 not making 250K year in the US? So then there must be 43,000,000 people under 18 and or making 250K a year. Where did you get that info?

Posted by: Anonymous | November 4, 2010 1:29 PM | Report abuse

Weimar Republic pretty much sums up what it will mean for us.

Posted by: mibrooks27 | November 4, 2010 2:41 PM | Report abuse

Tax cuts are only plausible if the debt and deficits are not a priority. The real problem is that 1 out of 4 homeowners are stuck in homes worth less than they paid and the only way out is inflation to offset the severe deflation in housing. We can hope the dollar is devalued more and that US goods are more affordable overseas. Tax cuts also have the added problem that governments fire workers. An unemployed government worker is just as unemployed as one from the private sector. The only solution is for people to pay down their debt until they are again comfortable. Right now, everyone is shell shocked for what happened in 2008.

Posted by: mertens266 | November 4, 2010 2:49 PM | Report abuse

1 in 4 homeowners or 1 in 4 owners with a mortgage?

If 60% own a home, and 2/3rds of homes have mortgages, that leaves only 10% of households "underwater".

Of course, everyone is underwater on their autoloan as soon as they drive their car off of the dealer lot. Heck, I was talking to some old family friends (all retirees), and all of them could recall folks who in the 1950s, 60s, and 70s sold their home for more than they had paid 5-10 years earlier. It happens. Stop whining.

Posted by: Anonymous | November 4, 2010 4:49 PM | Report abuse

Something better be done by the Dems or Republicans to help the people who live on social security. This will be the second year in a row that there will not be a cost of living increase. How can this be justified when everything has gone up in price including gas, food, clothing etc.
Maybe the "say NO" Republicans can figure out a way to solve this problem.

Posted by: marlene77

******************************************************************************

White haired goobers overwhelming voted for Tea Baggers on Tuesday. This was planned well before the election but of course they weren't going to do it beforehand as a few % points could have kept the status quo. The Republican party will be content to let a couple million seniors fall into poverty and they won't even be on record as cutting their benefits and Democrats will sit mute on the matter for they don't have to take responsibility for it. Just you wait for the tax cut coming to the rich at a price tag of $800 billion dollars.

Maybe the greediest generation is going to end up paying more of their debt back to the rest of American than they thought they would by swapping in the GOP.

Posted by: Anonymous | November 4, 2010 5:05 PM | Report abuse

Hey I'm not Anonymous!!!! I'm theObserver4 dangit

Posted by: Anonymous | November 4, 2010 5:15 PM | Report abuse

I don't really know if this will help the economy overall or not, though it's clear some people will be hurt by a devalued dollar, including me, an American living abroad on a fixed dollar income from rental property in the U.S. Just since the first of the year, despite the weakening dollar, the local currency has actually gained over 10% against the U.S. dollar, and is predicted to move at least that much more within the next two years or so. Therefore, this country is a shrinking importer of anything foreign, including goods from the U.S. Also, foreign tourists' spending is a major contributor to the local economy, but the number of Americans is shrinking fast owing to the rapidly weakening dollar, so this country won't benefit anytime soon from a weaker dollar -- nor will it be importing more American goods.

But maybe more important trade partners *will* up their imports, especially India, China, and Japan in this part of the world. (I live in Southeast Asia.) And maybe that will help my fellow Americans in the U.S. by creating more jobs.

I worry about our credibility, though, and how a loss of it can negatively affect our foreign trade. Geither recently lectured the G20 nations not to manipulate their currencies in ways that hurt the U.S. economy -- even while we're manipulating *our* currency quite merrily.

I also worry about folks in America dealing with higher prices for imported goods, which surely will rise. After all, many goods bought by Americans are imported -- computers, telephones, clothing, toys, etc. etc. etc.

I don't have any idea which route is best for us to take. It appears there are significant dangers no matter *which* road we take. Maybe there aren't any good ones, only ones less bad than others.

I would have most of the same concerns were I to move back to the U.S., given that many of them don't depend on where I live.

I just thank my lucky stars that I don't own a home in the U.S., for sure. And I pity those who do, unless they've paid off their mortgages and don't need to sell.

Posted by: MekhongKurt1 | November 4, 2010 5:49 PM | Report abuse

Ever consider when inflation is going to set in?

Posted by: SeniorVet | November 4, 2010 6:38 PM | Report abuse

Know what, I don't get it !

Posted by: Anonymous | November 4, 2010 6:40 PM | Report abuse

This is a scam. If a company is not selling "products" or "services" an infusion of $ will only last a short time and drop again.

Remember: A good stock will have "products" and "services" people want. All else is BS stocks.

If you have stock, the key to know when the fed money runs out and the stock start spike to drop and sell. The rich will make millions on an illusion of continued growth as you will buy more and watch it drop.

Posted by: Anonymous | November 4, 2010 7:10 PM | Report abuse

Inflation in the health care runs around 10-12% a year. Health care will out completive bidding to keep cost down will destroy the US. The democrat health care bill is design to maintain the spiraling cost and not deal with cost.

Health care cost is a hurricane in the ocean waiting to hit land in the future to wipe out your saving and take the rest of your possessions. Like the current debt hurricane hitting land. When health care cost hit millions more will join the tea party in hope of real change. To only way to get real change is to get enough signatures to vote these yoyo out yearly. Wipe a few congressman yearly out the rest for get in line fast. Wipe the prez out with signatures and votes and you will see change fast

The senior drug bill does not bid cost. It move drugs around yearly to different companies to make you switch companies to get a cheaper cost. or pay tons out of pocket. Every drug company get a cut...

All this money and we are still the 12-15 down the list of quality health care.

Posted by: Anonymous | November 4, 2010 7:26 PM | Report abuse

I was going to refinance last week, now I will wait until rates go down to 3.0%!!!!

Posted by: pt1836metz | November 4, 2010 7:45 PM | Report abuse

Hey, PRINT, PRINT, PRINT more and more money. Financial methamphetamine. Like meth, we will feel GREAT for a while, then the bad effects will start to hit. What could possibly go wrong with creating a few trillion dollars of funny money? A LOT of I N F L A T I O N.
At least China will own a LOT less real US wealth than they think. Ha ha ha. And they thought all that US debt that they own was actually worth something! I wonder if they are smart enough to figure that out? We got flat screen TVs, and they got promises to pay back, what will turn out to be, worthless paper dollars. And in 5 years, inflation will shrink the US National Debt to nothing when a dollar is worth a penny, if that.
Watch what happens to the price of oil next year. It won't be pretty. Gee, I wonder why GOLD went up $61 IN ONE DAY? Real money you think? Now I know why Cramer today said on CNBC that all his retirement money is in gold.

Posted by: Bill Simpson in Slidell, LA. | November 4, 2010 7:46 PM | Report abuse

Its about time Bernanke and his merry band of economists start hurting for a change.
A change we can believe in!

The comment about waiting to finance until rates go lower says it all. Debtors win, savers lose.

If the fed had said they were going to start raising rates, the floodgates would open with buyers trying to get a mortgage and buy a house before rates got higher. Bernanke is either a total fool or a dimwit. He doesn't even understand what motivates people.

You want banks to lend, take the free money punch bowl away and start raising rates. 5% points never broke a deal with an IRR of 12%.

Because of his insane actions, there is something else going on, and it has to do with the banks going broker and the financing of the federal debt.

Where the hell is Volcker when we need him? Is there anyone left to serve in government that isn't bought and paid for by Wall Street?

Send Bernanke to Asia with Odumbo. It's worth the extra $$. Maybe they'll keep him there since he's now messing up their economies.

Posted by: Anonymous | November 4, 2010 8:03 PM | Report abuse

Congratulations to the Fed. They pump $600 billion into the economy one day, and the next day inflation has already taken over. Oil prices spiked. Gold and silver prices spiked. Stock prices spiked. Everything is suddenly 2-3% more expensive. This is supposed to help the economy? I don't think so.

In the short term, I'm sure that a lot of people on Wall Street are greedily lapping up the Fed injection and taking profits while they can. But isn't this supposed to help the economy as a whole? When did a skyrocketing Dow suddenly become a stand-in for robust economic activity? Treating speculative markets as the center of our economy is what created the huge financial crisis two years ago, and the current Fed policy seems intent on continuing the practices that created the problem.

All the Fed money is going to do is to create a new market bubble. This has been economic policy in this country essentially since the mid-1990s. Greenspan and the Fed took the policy of inflating bubbles to deal with economic slowdowns, and with each successive bubble, the Fed has been left with fewer and fewer tools. Interest rates during the 1990s on savings accounts were commonly 5% in peak economic years, but then to beat back the dotcom burst, rates dropped, and they never rose back up to peak levels, even during the housing frenzy. Then, when the economy tipped again, the Fed couldn't drop rates as much. Now, they still need something more, and rate drops have been replaced with injections of cash and securities purchases. What next? Hyperinflation?

Inflating a bubble to help us get over the last burst bubble is simply not sound economic policy. It's a pity that the widely supported bill to audit the Fed got killed by Barney Frank and others in Congress because that actually had a chance of shedding some light on secretive Fed activities that are ultimately harming the economy. As it stands, we're just barreling toward destruction.

Oh, and enjoy that one-day 3% inflation rate, everyone! Thanks to the Fed, your dollar now buys 3% less than it did a couple days ago. It may take 3-6 months for the effect to fully be felt in department stores and supermarkets, but commodities all just spiked in response to the Fed move, so the inflation will be felt by early next year.

Posted by: Anonymous | November 4, 2010 8:42 PM | Report abuse

If the new Republican House majority allows
this example of "smoke and mirrors" to continue, they will be on the outside again in 2012.

Posted by: Anonymous | November 4, 2010 9:45 PM | Report abuse

Of course it hurts the middle and working classes - and those who live on pensions.

When has the government EVER cared about US?

The only people Obama cares about are the rich.

Posted by: solsticebelle | November 4, 2010 10:46 PM | Report abuse

Long story short the Fed will be printing money to buy Treasury IOU's (bonds) because the Chinese are getting nervous about buying our debt with a declining dollar. This is the real problem in our country, not liberal or conservative, not republican or democrat.

Posted by: Anonymous | November 5, 2010 1:46 AM | Report abuse

Let's clear up one thing here. If you already own bonds outright, then the annual interest income you receive from the bonds will not change. Quantitative easing doesn't affect that. (That's what a bond is, the interest payments are fixed dollar amounts.) So the quantitative easing will not really affect you. In fact, if you have long maturity bonds then their value will increase, so you are actually wealthier.

Posted by: Anonymous | November 5, 2010 2:14 AM | Report abuse

The true cost of living for the lower and middle class goes up; energy, food, transportation, clothes. We all have to deplete savings to tread water. Mortgage rates are lower, but banks will only refinance for folks that have lots of equity, or lots of cash (see above). So, even if you've got a good job, and pay your bills, it's tough for the middle class to benefit from the lower interest rates. Not good!

Posted by: DontGetIt | November 5, 2010 7:17 AM | Report abuse

With the end of the Stimulus, what's left to do? The GOP delusionals will no doubt begin their austerity program of cutting taxes and paying down debt, further dampening demand. The resulting layoffs of public employees, including State and local public employees, will not help the unemployment situation. Tea Party hate of the Stimulus bodes poorly for any new relief for the states or employment programs.

This is the last tool in the box for the Fed.

Posted by: rowens1 | November 5, 2010 8:36 AM | Report abuse

Great. We continue to support interest rates which basically allow Wall Street to extort money from people who would prefer a modest but secure income from interest on their savings.

Now if you save money, you can't even keep up with inflation.

Posted by: st50taw | November 5, 2010 9:01 AM | Report abuse

In an open world market, work flows, when there are no "dams" to lower cost areas. Highly capital intensive industries, using equipment that is pretty much the same price anywhere in the world, can resist this to some extent (their labor factor is a smaller portion of total costs). In effect, nations are relatively obsolete in todays world. Immigration "dams" like the great wall between Mexico and US can only work so much. The tide of humanity will overcome all barriers. Sorry for the U.S., but true. Companies have no morals, they are just designed to make money.

Posted by: Anonymous | November 5, 2010 9:02 AM | Report abuse

It means that the chairman of the federal reserve is having his own bailout using federal resources without congressional approval. It means the federal reserve is corrupt.

Posted by: sobi1 | November 5, 2010 9:31 AM | Report abuse

Import prices will go up. Export prices down. Result - increase in jobs and corporate profits.

Interest rates down. Inflation up. Result -housing will stabilize.

The rich will get richer and the poor will get poorer.

Posted by: Anonymous | November 5, 2010 9:35 AM | Report abuse

It is apparent that no one is giving Bernanke any credit for holding off for so long and not using this approach until it became the only way to free the economy up.
Those crying and the pitiful moanings that I read are less than economic geniuses. The Obama government does not want to see people suffer and lose their jobs or homes. Big Business is sitting on Billions of dollars and not hiring because they too are afraid of a another downturn. But do we live in fear or do we go forward and fight and work our way out of this conundrum? It is time for Big Business to step forward and use their millions in profits to set the economy right. Or, are they waiting for the 2012 elections so that we can suffer some more and vote Republican. This administration is being torpedoed by the Republicans and Big Business.
Wake UP America!

Posted by: Anonymous | November 5, 2010 10:17 AM | Report abuse

Look for some of the stupid comments posted on this site. First lets cover social security. It is not supposed to be a retirement system. It is a supplement to your retirement. I hope that they make it mandatory for everyone to have a 401K at their job with a minimum amount going to it.
Next, don't tell me about the GOP cutting the debt. Let's see the GOP controlled the congress and the white house and the debt doubled. The government grew more under Pres. Bush than under Clinton, Carter, and Obama combined.
Everyone needs to face the hard truth, we are in for some tough times and yes, taxes have to be raised. Reagan gave a tax cut but, in reality the economy didn't grow from his tax cut the economy grew because Ronnie spent a lot of money (mostly on defense) and again the government grew. What needs to happen is that the Bush tax cuts need to expire. It has been proven that the trickle down theory doesn't work (Reagan, Bush II). They both tried it by lowering the taxes on the wealthy hoping that they would spend more money to help the lower class. It doesn't work. Tax breaks must go for the lower and middle class. The lower and the middle class are the only groups that will consume products because they have to. The wealthy won't buy a new car because they received a tax break. They already have their homes, farms, vacation homes, maids, butler, garderners so they money just goes into investments of stocks that have always been around. So the Fed lowering the interest is fine, but, until the banks (again those wealthy individuals who happen to make more in one month than I will make in 20 years) lower the rates on upside down mortgages we are still going to have problems.
So until Republicans and Democrats, Blue Dogs, and Tea Party and Independents sit down and work together we are going to be in trouble. In another 2 years with the ecomony still in the tank what are the Representatives going to tell their constitutents, they need more time. So until everyone stops worrying about which party and start worrying about Americans we are in trouble. This is a time that hard decisions need to be made (taxes will need to be raised for social security, the deficit, energy etc), but, no one has the stomach to say that because they are more worried about trying to get re-elected than about fixing the problems. I also love the fact that everyone wants to fuss about government pensions, government benefits, you might want to look at the retirement plans, benefits, etc of your elected officials (why would someone spend millions of dollars for a job that only pays $150,000.00 a year).

Posted by: michael1963 | November 5, 2010 10:43 AM | Report abuse

So basically if you're a regular person, it hurts you.

It hurts you especially badly if you have a fixed income.

And it will hurt your chance to enjoy some of the finer imported things in life (cheese, wine....)

Basically, unless you're a rich fat cat, it will hurt you.

Posted by: docwhocuts | November 5, 2010 12:35 PM | Report abuse

Buy gold!!

Posted by: B-rod | November 5, 2010 3:30 PM | Report abuse

What it means is all too clear about how the Chairman's plan to "assist" the US population via some imaginary "wealth effect" due to QE2, is about to backfire. As is now becoming all too clear, the prices of energy and food products are about to surge, and in many cases have already done so, but courtesy of some clever gimmicks (Wal Mart selling what was formerly 39 oz of coffee as a 33.9 oz product for example) the end consumers haven't quite felt it yet. They will soon. There is a limit to how much every commodity can open limit up before it appears on the SKU price at one's local grocer. And while a marginally declining "core CPI" is irrelevant for this exercise as it measures only items that are completely outside of the scope of everyday life, what will be far more important to end consumers will be the push higher in food and energy costs. The problem, however, is that for the lowest 20% of Americans, as per the BLS, food and energy purchases represent over 50% of their after-tax income (a number which drops to 10% for the wealthiest twenty percentile). In other words should rampant liquidity end up pushing food and energy prices to double (something that is a distinct possibility currently), Ben Bernanke may have very well sentenced about 60 million Americans to a hungry and very cold winter, let alone having any resources to buy trinkets with the imaginary wealth effect which for over 80% of the US population will never come.

Posted by: Anonymous | November 5, 2010 6:45 PM | Report abuse

It means that the U.S. has become a banana republic that runs a dollar printing press to try to stimulate growth. As the value of the dollar drops, everything we import increases in dollar terms, including petroleum. Get ready for higher gas prices, more pessimism and a prolongation of the slump we're in. It is the modern version of the "beggar thy neighbor policies" that prolonged the great depression of the 1930s for a decade. WAy to go Bernanke!

Posted by: fcoas | November 5, 2010 10:08 PM | Report abuse

How on Earth can they print that much money and not devalue the dollar at the same time? Answer: They can't. Did you see what happened to the price of gold lately? I sure am happy that I have been converting the falling dollar into the yellow stuff for the past two years. So are a lot of other sneered at "gold bugs."

http://flyoverfeedback.blogspot.com

Posted by: FlyoverFeedback | November 6, 2010 12:09 PM | Report abuse

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