[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.)
“Yeah, it’s interesting…the former head of Goldman Sachs, John Whitehead, was also the former head of the New York Federal Reserve. And I met with him, and he said as soon as the Fed stops buying all the debt that we’re issuing—which they’ve been doing, the Fed’s buying like three-quarters of the debt that America issues. He said, once that’s over, he said we’re going to have a failed Treasury auction, interest rates are going to have to go up. We’re living in this borrowed fantasy world, where the government keeps on borrowing money. You know, we borrow this extra trillion a year, we wonder who’s loaning us the trillion? The Chinese aren’t loaning us anymore. The Russians aren’t loaning it to us anymore. So who’s giving us the trillion? And the answer is we’re just making it up. The Federal Reserve is just taking it and saying, “Here, we’re giving it.’ It’s just made up money, and this does not augur well for our economic future.
via Glenn Beck.
You can only live on borrowed money for so long. After awhile someone comes looking for what you owe… plus the vig.
Refi that house now because if you think it’s bad now but wait until we have 9.0% unemployment and 9.0% inflation.
The wheels are falling of the bus.
The United States on Wednesday opened its banking market to ICBC, China’s biggest bank, for the first time clearing a takeover of a US bank by a Chinese state-controlled company.
Just days after high-level US-China economic talks in Beijing, the Federal Reserve approved an application from Industrial and Commercial Bank of China to buy a majority stake in the US subsidiary of Bank of East Asia.
The transaction will make ICBC the first Chinese state-controlled bank to acquire retail bank branches in the United States.
via Yahoo! News Canada.
An interesting development. Curious why so little coverage of this in the U.S. MSM.