How the rich will benefit from the Fed’s QE3

Grant J. Kidney — In a recent statement concerning the Federal Reserve’s most recent jaunt of quantitative easing, billionaire Donald Trump notated that, ‘People like me will benefit from this.’ But why exactly is this the case?

For starters, quantitative easing is merely a program on part of the Federal Reserve to print more and more dollar bills. The Fed then lends this printed money to the big banks who in turn are supposed to lend to businesses or individuals in need. Under QE1 and QE2 however, it has been shown that rather than lending, the mega banks have instead decided to hoard all that had been issued to them which only set the stage for further quantitative easing.

In other words, quantitative easing is a program designed to throw free money in the direction of the super-wealthy who have absolutely no intention of distributing said wealth to the lower strata of the artificial social pyramid. All wealth is invariably sucked up to the top under this model and will stay there… forever.

Unfortunately for us tax payers, we take the biggest loss when we visit the local super market or fuel up our vehicles. Because more and more money has been printed, the value of the dollar naturally decreases and hence prices shoot through the roof on multiple fronts.

Here’s a portion of an article from ‘End of the American Dream’ which accurately punctuates key elements of the Fed’s QE3 program and demonstrates how it will prove disastrous for the U.S. economy.

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Ready or not, QE3 is here, and the long-term effects of this reckless money printing by the Federal Reserve are going to be absolutely nightmarish.

The Federal Reserve is hoping that buying $40 billion worth of mortgage-backed securities per month will spur more lending and more economic activity.  But that didn’t happen with either QE1 or QE2.  Both times the banks just sat on most of the extra money.

As I pointed out the other day, U.S. banks are already sitting on $1.6 trillion in excess reserves.  So will pumping them up with more cash suddenly make them decide to start lending?  Of course not.

In addition, QE3 is not likely to produce many additional jobs.  As I showed in aprevious article, the employment level did not jump up as a result of either QE1 or QE2.  So why will this time be different?  But what did happen under both QE1 and QE2 is that a lot of the money ended up pumping up the financial markets.

So once again we should see stock prices go up (at least in the short-term) and commodities such as gold, silver, food and oil should also rise.  But that also means that average American families will be paying more for the basic necessities that they buy on a regular basis.

The most dangerous aspect of QE3, however, is what it is going to do to the U.S. dollar.  Most of the rest of the world uses the U.S. dollar to conduct international trade, and by choosing to recklessly print money Ben Bernanke is severely damaging international confidence in our currency.

If at some point the rest of the world rejects the dollar and no longer wants to use it as a reserve currency we are going to be facing a crisis unlike anything we have ever seen before.  The real debate about QE3 should not be about whether or not it will help the economy a little bit in the short-term.

Rather, everyone should be talking about the long-term implications and about how QE3 is going to accelerate the destruction of the dollar.

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