The Quantitative Easing Programs Put Into Perspective

[FaninAma]

The United States spent around 350 billion to fight World War II. In 2012 dollar terms accounting for inflation that is around $4.4 trillion. So far under the various forms of Quantitative Easing the Federal Reserve spending is approaching $4 trillion and with devaluation of the currency over the past 4+ years the figure probably exceeds $4.4 trillion in terms of 2012 dollars.

The spending in WWII brought the country out of the Great Depression. What benefit has the Federal Reserve programs had beyond the immense benefit they have provided to Wall Street and Big Banks?

[diverdog]

The United States spent around 350 billion to fight World War II. In 2012 dollar terms accounting for inflation that is around $4.4 trillion. So far under the various forms of Quantitative Easing the Federal Reserve spending is approaching $4 trillion and with devaluation of the currency over the past 4+ years the figure probably exceeds $4.4 trillion in terms of 2012 dollars.

The spending in WWII brought the country out of the Great Depression. What benefit has the Federal Reserve programs had beyond the immense benefit they have provided to Wall Street and Big Banks?

You are comparing apples to rocks.

[FaninAma]

You are comparing apples to rocks.
How so? The point of my post was simply to give a reference point on how much money the Fed has been printing and injectng into the system in what appears to be a desperate attempt to pump up Wall Street and the big bankers to the detriment of retirees and savers.

To give more perspective about the immense amount of stimulus the Fed is engaged in I would point out that since 2001 the total amount spent on the wars in Afghanistan and Irag is $1.4 trillion or about 1/3 of what the Fed has printed just to keep the economy limping along.

The parts of the financial system that have shown growth are totally dependent on the Fed funds. Even the mention of withdrawing a portion of the QE program sends the equity and bond markets into convulsions. They will have to stop sometime and we will see what the true state of the economy is. The only thing holding Obama's recovery together is Bernenke's printing press.

[cleller]

I'm conflicted, but fascinated by the whole thing. In some ways, it seems to have worked brilliantly, as long as you are an investor in the stock market. Even for retirees, if they had good exposure to the bond market, things have done well.

For retirees who played by the old rules of cds, savings accounts, it has been miserable. Then there are also the dangers of printing so much money.

If Bernanke were simply told to do whatever is necessary to keep the economy from cratering in the present, it seems he's done it. He certainly knew what steps to take to avoid the 1930s again. Who knows how it will all turn out, though.

I get that a lot of the "prosperity" is false. Much of it is limited to bankers, and the upper incomes. Obama's "fat cat" whipping boys have definitely been done right by QE.

[SoonerorLater]

Once you start down the road of monetizing debt there really isn't a good exit strategy it's a matter of how and when things blow up.

[diverdog]

How so? The point of my post was simply to give a reference point on how much money the Fed has been printing and injectng into the system in what appears to be a desperate attempt to pump up Wall Street and the big bankers to the detriment of retirees and savers.

To give more perspective about the immense amount of stimulus the Fed is engaged in I would point out that since 2001 the total amount spent on the wars in Afghanistan and Irag is $1.4 trillion or about 1/3 of what the Fed has printed just to keep the economy limping along.

The parts of the financial system that have shown growth are totally dependent on the Fed funds. Even the mention of withdrawing a portion of the QE program sends the equity and bond markets into convulsions. They will have to stop sometime and we will see what the true state of the economy is. The only thing holding Obama's recovery together is Bernenke's printing press.

Maybe I misunderstood your point.

I think the big difference is that wars are never good and do not lead to prosperity until there is peace. QE if done right can help the economy. Wars generally do not. But I do get your point about the size of both efforts.

[cleller]

If you read this:
http://news.yahoo.com/exclusive-4-5-us-face-175906005.html

Then examine the market returns, it kind of illustrates the big disconnect between the masses and financial class.

[BigTip]

The parts of the financial system that have shown growth are totally dependent on the Fed funds. Even the mention of withdrawing a portion of the QE program sends the equity and bond markets into convulsions. They will have to stop sometime and we will see what the true state of the economy is. The only thing holding Obama's recovery together is Bernenke's printing press.

Exactly. The public needs to be educated to the fact that the market has nothing to due with the economy anymore. The only reason the market is thriving right now is that the banks have nothing else to do with the (printed) money that Bernenke is giving them.

Has anyone read anything that has all this coming out okay? I have not. Everything I have read about the end game of this uses words like catastrophe, apocalyptic, total collapse, social unrest, etc etc.

[diverdog]

Exactly. The public needs to be educated to the fact that the market has nothing to due with the economy anymore. The only reason the market is thriving right now is that the banks have nothing else to do with the (printed) money that Bernenke is giving them.

Has anyone read anything that has all this coming out okay? I have not. Everything I have read about the end game of this uses words like catastrophe, apocalyptic, total collapse, social unrest, etc etc.

My banks economist are not worried about it.

[RUSH LIMBAUGH is my clone!]

If the government, or quasi-govt. increases the money supply, the inevitable result is inflation.

[pphilfran]

My banks economist are not worried about it.
At current levels...any idea on what level would be a concern?

[FaninAma]

My banks economist are not worried about it.

If the bond market takes a big hit and interest rates on the 10 year treasury bonds go north of 5 or 6% your bank will probably have some concern then.

When do your bank's economists think QE will end? Never?

[8timechamps]

How so? The point of my post was simply to give a reference point on how much money the Fed has been printing and injectng into the system in what appears to be a desperate attempt to pump up Wall Street and the big bankers to the detriment of retirees and savers.

To give more perspective about the immense amount of stimulus the Fed is engaged in I would point out that since 2001 the total amount spent on the wars in Afghanistan and Irag is $1.4 trillion or about 1/3 of what the Fed has printed just to keep the economy limping along.

The parts of the financial system that have shown growth are totally dependent on the Fed funds. Even the mention of withdrawing a portion of the QE program sends the equity and bond markets into convulsions. They will have to stop sometime and we will see what the true state of the economy is. The only thing holding Obama's recovery together is Bernenke's printing press.

While I am no fan of the Fed, I do disagree with the point that the retirees and savers are being hurt. I can almost argue that the continual gain has been a major benefit to anyone invested in the market. I cannot/will not defend the big bankers though.

[FaninAma]

While I am no fan of the Fed, I do disagree with the point that the retirees and savers are being hurt. I can almost argue that the continual gain has been a major benefit to anyone invested in the market. I cannot/will not defend the big bankers though.

Most retirees have whatever savings/retirement they are living on in fixed income investments like bonds, money markets and CDs. They do not gamble in the equity markets because they do not have time to recoup any big losses should the market hit a downdraft. Also, the Social Security trust fund is required by law to only purchase US Treasury instruments so tell me what the low interest rates have done to the SS trust fund over the last 4 to 5 years. I have seen some claims that the fund will be insolvent about 5 to 8 years sooner now because of the low rate of return it has been getting.

If you really don't understand how artificially low interest rates are hurting the elderly and others on fixed incomes then I suggest you do some research on investing.

[pphilfran]

While I am no fan of the Fed, I do disagree with the point that the retirees and savers are being hurt. I can almost argue that the continual gain has been a major benefit to anyone invested in the market. I cannot/will not defend the big bankers though.

He is probably talking about retirees that have a substantial amount of their savings in bonds and other interest bearing accounts...their yields are low due to the QE...also those bonds will be hammered down when yields rise...and they will rise, how much nobody knows...

[pphilfran]

Most retirees have whatever savings/retirement they are living on in fixed income investments like bonds, money markets and CDs. They do not gamble in the equity markets because they do not have time to recoup any big losses should the market hit a downdraft. Also, the Social Security trust fund is required by law to only purchase US Treasury instruments so tell me what the low interest rates have done to the SS trust fund over the last 4 to 5 years. I have seen some claims that the fund will be insolvent about 5 to 8 years sooner now because of the low rate of return it has been getting.

If you really don't understand how artificially low interest rates are hurting the elderly and others on fixed incomes then I suggest you do some research on investing.

Little doubt in my mind he understands...he just didn't connect your dots...

[FaninAma]

He is probably talking about retirees that have a substantial amount of their savings in bonds and other interest bearing accounts...their yields are low due to the QE...also those bonds will be hammered down when yields rise...and they will rise, how much nobody knows...

Not only that but the interest rates of money markets and CD's are closely tied to the prime interest rate set by the FED. A lot of elderly retirees were depending on using a reasonable interest rate to help defer living expenses after retiring. I know my mother was but instead of a decent return of 4 to 6% on her CD's and money markets she has been forced to adjust to the 1% or less return these investments have drawn for the past 4 to 5 years.

[pphilfran]

Not only that but the interest rates of money markets and CD's are closely tied to the prime interest rate set by the FED. A lot of elderly retirees were depending on using a reasonable interest rate to help defer living expenses after retiring. I know my mother was but instead of a decent return of 4 to 6% on her CD's and money markets she has been forced to adjust to the 1% or less return these investments have drawn for the past 4 to 5 years.

There is also the other side...

Higher interest rates mean higher inflation or devaluing dollar...which both hurt those on fixed income...it also would add greatly to US debt servicing...

It will be interesting to see how much impact we will see when the fed stops the QE buyback....you can bet your *** they will back out slowly...

[SoonerorLater]

Banks should have to compete against other banks for every dollar of deposits. This Fed giveaway program at the expense of savers is unconscionable. People who have been prudent and done the right things are being punished to reward the profligacy of the "elite" set. If banks had to pay free market rates to prevent collapse then savers would and should be rewarded with MUCH higher rates. How this can be condoned in this country is beyond me.

[8timechamps]

There is also the other side...

Higher interest rates mean higher inflation or devaluing dollar...which both hurt those on fixed income...it also would add greatly to US debt servicing...

It will be interesting to see how much impact we will see when the fed stops the QE buyback....you can bet your *** they will back out slowly...

BINGO!

Fan, I'm looking past the affect the current interest rate environment has on the SS trust. I can assure you that I more than understand all there is to understand about investing. I've been doing it professionally for over 25 years.

I get the concern for current retirees (although I don't think any portfolio should be absent equities, regardless of age), however there are far more folks that need the markets to continue upward than don't. Sure, in a perfect world, we would have both the bond and equity markets cooperating, but I think the Feds action over the past few years has made that nearly impossible.

Secondly, there is no "quick fix" for the current state of affairs, as pphilfran pointed out, a rising interest rate leads to high inflation and/or the evaluation of the dollar...and that doesn't even factor in consumer lending (which is already like getting water from a stone), if this economy is to recover, lending has to open up at some point. The US is in a tricky spot right now, higher interest rates versus a higher fixed income market. I know it's not that simple, but that's the gist of it.

Let me preface what I'm about to say with this; I understand that there are many, many elderly retirees that depend on SSI to live. The government must find a "fix it". However, (and this is more for the current and future working generations) DO NOT assume SSI will be available for retirement planning. If it is, great. My personal belief in the SS system doesn't change the fact that a spiraling equities market hurts more than a low bond market.

[8timechamps]

To add (one more thing), while I NEVER plan for SSI in retirement, the trust IS NOT going broke. The only way the SS trust goes away is if congress elects to shut it down, and that's not going to happen.

I could have a very long, drawn out debate with anyone that doesn't agree, but there is no "running out of money" scenario short of some kind of catastrophic event that forces extinction of all U.S. working individuals.

[SanJoaquinSooner]

To add (one more thing), while I NEVER plan for SSI in retirement, the trust IS NOT going broke. The only way the SS trust goes away is if congress elects to shut it down, and that's not going to happen.

I could have a very long, drawn out debate with anyone that doesn't agree, but there is no "running out of money" scenario short of some kind of catastrophic event that forces extinction of all U.S. working individuals.

I agree -- the worst case scenario (short of World War III or a giant astroid crashing into the U.S.) is a cut in SS benefits. Maybe we get 75% of what we are presently pegged to get. But it won't be 0%.

[SoonerorLater]

BINGO!

Fan, I'm looking past the affect the current interest rate environment has on the SS trust. I can assure you that I more than understand all there is to understand about investing. I've been doing it professionally for over 25 years.

I get the concern for current retirees (although I don't think any portfolio should be absent equities, regardless of age), however there are far more folks that need the markets to continue upward than don't. Sure, in a perfect world, we would have both the bond and equity markets cooperating, but I think the Feds action over the past few years has made that nearly impossible.

Secondly, there is no "quick fix" for the current state of affairs, as pphilfran pointed out, a rising interest rate leads to high inflation and/or the evaluation of the dollar...and that doesn't even factor in consumer lending (which is already like getting water from a stone), if this economy is to recover, lending has to open up at some point. The US is in a tricky spot right now, higher interest rates versus a higher fixed income market. I know it's not that simple, but that's the gist of it.

Let me preface what I'm about to say with this; I understand that there are many, many elderly retirees that depend on SSI to live. The government must find a "fix it". However, (and this is more for the current and future working generations) DO NOT assume SSI will be available for retirement planning. If it is, great. My personal belief in the SS system doesn't change the fact that a spiraling equities market hurts more than a low bond market.

The problem is people have to be able to depend on something. The Federal Government shouldn't be in the business of picking winners and losers. The Fed is doing nothing but creating more heartbreak down the line. There is no level playing field. Our system has become intrinsically unfair. No way should people have to try to figure out arcane Fed Interest Policy in order to develop a retirement plan. It's beyond the scope of what a normal individual can do. I have no problem with suffering the consequences of poor investment planning but what out government is doing is just cutting the legs out from people who have done the right things in life. I'm angry.

[cleller]

I'm mystified when I realize that a great many people do depend on the government to do most of the providing for them in their elder years, whether its thru SS, or whatever.

The government is the one factor I leave completely out of retirement planning.

[SoonerorLater]

I'm mystified when I realize that a great many people do depend on the government to do most of the providing for them in their elder years, whether its thru SS, or whatever.

The government is the one factor I leave completely out of retirement planning.

No mystery at all. The vast majority of people have never been able to save enough money to retire comfortably. Never have. The golden age of retirement in America was made possible by defined benefit pensions coupled with Employer paid healthcare and SS.

[diverdog]

At current levels...any idea on what level would be a concern?

When people stop paying their mortgages.

I sort of mispoke. They are concerned but they are not in panic.

[diverdog]

If the bond market takes a big hit and interest rates on the 10 year treasury bonds go north of 5 or 6% your bank will probably have some concern then.

When do your bank's economists think QE will end? Never?

We have had treasuries go well north of 10% and we survived.

Do you know what the top concern was in big cities 115 years ago?

[FaninAma]

We have had treasuries go well north of 10% and we survived.

Do you know what the top concern was in big cities 115 years ago?

the country didn't have a $17. Trillion dollar debt to service then.

[SCOUT]

I would suggest that economics should cease the use of percentages as a sole source of measure. When you use real numbers, reality starts to set it.

[FaninAma]

To add (one more thing), while I NEVER plan for SSI in retirement, the trust IS NOT going broke. The only way the SS trust goes away is if congress elects to shut it down, and that's not going to happen.

I could have a very long, drawn out debate with anyone that doesn't agree, but there is no "running out of money" scenario short of some kind of catastrophic event that forces extinction of all U.S. working individuals.

Technically you are right because the government will treat it like another deficit budget item. Being solvent and simply being in existence are 2 different things. I guess the Fed can always fire up the magic printing presses to keep it afloat with another gargantuan QE program.

Who knew we could borrow and print our way to prosperity?

[diverdog]

the country didn't have a $17. Trillion dollar debt to service then.

Nor did we have a gdp of $15,685 T.

The reason I asked you the other question is to prove a point. In 1900 or so one of the top concerns in major US cities was how to handle horse manure. The point that I am making is that the things that concern us today will be another footnote in history. The world has gotten through a whole lot worse than QE. I worry more about some natural event wiping us than what the fed does.

[REDREX]

Nor did we have a gdp of $15,685 T.

The reason I asked you the other question is to prove a point. In 1900 or so one of the top concerns in major US cities was how to handle horse manure. The point that I am making is that the things that concern us today will be another footnote in history. The world has gotten through a whole lot worse than QE. I worry more about some natural event wiping us than what the fed does.----And I am sure that Washington wanted to prop up the manure industry when it was no longer needed

[FaninAma]

Nor did we have a gdp of $15,685 T.

The reason I asked you the other question is to prove a point. In 1900 or so one of the top concerns in major US cities was how to handle horse manure. The point that I am making is that the things that concern us today will be another footnote in history. The world has gotten through a whole lot worse than QE. I worry more about some natural event wiping us than what the fed does.

I don't think we know how bad QE will turn out to be because it has never been tried before in this country. It has been tried in other countries like the Weimar Republic in Germany and Zimbabwe with disastrous results but of course those countries didn't have the ability to sell their debt around the world. That's what worries me about the QE programs. No longer does this country have the ability to get other countries to buy our debt at the levels we need to finance out government obligations....we now have to have a pseudo-government agency buy trillions of our own treasury obligations to artificially control interest levels.

I think it is a worrisome development that the US Treasury interest rat is going up despite QE. By the way, what would our GDP be if deficit government spending were not included in its calculation?

[TheHumanAlphabet]

I get that a lot of the "prosperity" is false. Much of it is limited to bankers, and the upper incomes. Obama's "fat cat" whipping boys have definitely been done right by QE.

This is the deal, wait for the Stock Market to crash, depress, or readjust and all that "profit" will be fleeting, but the fat cat bankers in NYC and elsewhere will have their money, cash in hand... The rest of us will be left with crumbs...

[REDREX]

This is the deal, wait for the Stock Market to crash, depress, or readjust and all that "profit" will be fleeting, but the fat cat bankers in NYC and elsewhere will have their money, cash in hand... The rest of us will be left with crumbs...----Barack will not care as long as it is not on his watch

[FaninAma]

Here is another point to consider. Why are we paying interest to the Fed for doing the very same thing Congress could do without paying interest....namely monetizing the debt?

[TAFBSooner]

----And I am sure that Washington wanted to prop up the manure industry when it was no longer needed

Nope, they're doing everything they can to undermine the private manure industry . . .

[diverdog]

I don't think we know how bad QE will turn out to be because it has never been tried before in this country. It has been tried in other countries like the Weimar Republic in Germany and Zimbabwe with disastrous results but of course those countries didn't have the ability to sell their debt around the world. That's what worries me about the QE programs. No longer does this country have the ability to get other countries to buy our debt at the levels we need to finance out government obligations....we now have to have a pseudo-government agency buy trillions of our own treasury obligations to artificially control interest levels.

I think it is a worrisome development that the US Treasury interest rat is going up despite QE. By the way, what would our GDP be if deficit government spending were not included in its calculation?

As long as we remain stable other nations will buy our debt. Where else would you put your money?

I do not lose a bit of sleep over QE because there isn't a damn thing I can do about it.

[TAFBSooner]

I get that a lot of the "prosperity" is false. Much of it is limited to bankers, and the upper incomes. Obama's "fat cat" whipping boys have definitely been done right by QE.

Banksters are his whipping boys in public, but his clients behind the scenes. After their feelers got hurt by one of his speeches, he had to literally tell them he was standing between them and the villagers with torches and pitchforks. How thin-skinned does a bankster have to be to not figure that out?

[RUSH LIMBAUGH is my clone!]

Lots of active, passionate statists around here. Keynesian good, Constitution bad. Got it!

[8timechamps]

The problem is people have to be able to depend on something. The Federal Government shouldn't be in the business of picking winners and losers. The Fed is doing nothing but creating more heartbreak down the line. There is no level playing field. Our system has become intrinsically unfair. No way should people have to try to figure out arcane Fed Interest Policy in order to develop a retirement plan. It's beyond the scope of what a normal individual can do. I have no problem with suffering the consequences of poor investment planning but what out government is doing is just cutting the legs out from people who have done the right things in life. I'm angry.

I should have been clear that I do not like the situation as it stands now. The Fed has made several boneheaded moves that have led to the environment in which we find ourselves. My point is/was that there isn't a win/win plan out there right now.

I know a lot of folks depend on SSI in retirement. Especially folks that are currently retired, or very close to retiring. My point (in my previous post) was that the current generation of workers should plan for no SSI. There are more options to self fund one's retirement now than there have ever been, and it's time people take matters into their own hands. You are correct, the average person shouldn't have to understand the Fed policy and how it effects their retirement, but anyone serious about retirement planning should take the time to understand what they need to do to ensure retirement funding is available sans SSI.