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"consequences that Federal Reserve policy makers have not acknowledged. For one thing, the banks have used (bailout and liquidity funds) to increase their profits and to continue paying high salaries and bonuses. What their lending is inflating are asset prices," not output and employment. "And asset price inflation is increasing the power of property over living labor and production, elevating the FIRE sector (finance, insurance, and real estate) further over the 'real' economy."
Moreover, QE II is a zero sum game. It can only work at the expense of other economies. That's why it's "financial aggression," destroying global currency stability. It also harms America, the greater economy sacrificed for the FIRE sector, especially Wall Street, destroying countries and human beings for profit.
Todays "global economy is being turned into a tributary system, achieving what military conquest sought in times past." It's "implicit in QE II." However, other countries are reacting, "taking defensive measures against this speculation (and) 'free credit' takeovers" with cheap dollars, using various methods to do it.
The Reserve Bank of India just raised rates for the sixth time to 6.25%. The Reserve Bank of Australia increased theirs for the seventh time to 4.75%. In mid-October, China raised its rates. Brazil raised its tax on foreign investment in government bonds. South Korea may reinstate a withholding tax on foreign investors' holdings in some securities. Watch for other nations to impose similar measures, mindful of Fed policy.
Today, says Hudson, the "major international economic question....is how national economies can achieve greater stability by insulating themselves from predatory (Fed) financial movements," a zero sum game they'll lose if they can't.
Effectiveness of Quantitative Easing Questioned
QE I failed. Will QE II do better? Many economists think not, including Bernanke, having argued (with former Fed vice chairman Alan Blinder) against it in 1988. Minneapolis Fed president Narayana Kocherlakota agrees. Speaking in London in early October, he explained several reasons why, a key one that banks, flush with reserves, aren't lending.
Pimco's co-CEO Mohamed El-Erian also thinks QE II will fail, headlining on November 4 in the Financial Times, "QE2 blunderbuss likely to backfire," saying:
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