[Lawrence] Lindsey said that with the Fed purchasing at least $40 billion a month in mortgage debt through QE3, “they are buying the entire deficit.” …
The central bank’s recently announced bid to stimulate the economy has also taken the pressure off politicians to deal with the U.S. fiscal cliff, Lindsay argued, which could result in destabilizing tax hikes and spending cuts automatically taking effect early next year.
“The Fed, maybe because it can’t do otherwise, has told the Congress: ‘We’re going to buy your bonds no matter what,’” Lindsey said. “I think that’s keeping the pressure off the president, off the Congress.”
The effective of QE3 on interest rates may also keep Congress from reining in borrowing.
“If the (Fed) chairman’s estimates of the effectiveness of QE3 on interest rates come true, we’re going to be down to an average cost of borrowing for the government of 0.6 of a percentage point,” Lindsey said. “Why would any Congress not borrow and spend if they could borrow at 60 basis points?”
This is all going to come to a screeching halt… and not in a nice way. The Federal Reserve simply may not exist in 5 or 10 years. It will have failed. Congress with throw the Fed under the bus and create a new central bank.
Of course years of financial chaos will ensue and the value of the dollar will collapse. (Note to self: move all the money you can offshore.)