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Can The Federal Reserve Print Jobs Or Just Money?

Updated on September 18, 2012

So Just Crank Up The Printing Presses?

This Isn't The Secret Sauce...But It Is One More Nudge Closer To The Edge Of The Cliff.

Obama recently did his shtick routine claiming that the Republicans didn't reveal their secret sauce to cure our economic woes. Since there is no secret sauce, other than leadership, I'm sure Obama missed it, maybe just about as much as he's been missing from the Oval Office. The question now, since he has tried every Keynesian economic trick available is what does Chairman Bernanke expect to do now that he has announced QE3. Is it about anyone's job but his own or Obama's?

What Bernanke announced is absurd and won't create any jobs. He might save his own and Obama's but beyond that the American electorate needs to wake up, take off those rose colored glasses and smell the coffee. What this economic genius (supposedly according to some) is proposing is to print $40 billion a month and pump it into the economy to infinity until the private sector starts creating jobs. Now think about that for a minute. That will amount to another $480 billion a year on top of the already astronomical debt this nation faces. This is absolute political insanity.

Looking at the results of QE1 and QE2 undertaken by the Fed since Obamanomics came on the scene don't expect this to work either. Other than to add to the 2 trillion dollar debt that QE1 and QE2 lopped on top of the federal deficit don't hold your breath. At this point the truth is that Ben Bernanke doesn't know what else to do. He should try doing nothing.

The wording of the announcement leaves a little more definition so that the lay person can understand it. Remember all those "toxic assets" that the banks ended up holding because of the collapse of the housing market. You know the collapse of Freddie and Fannie that Clinton and his crew masterminded by thinking every American should own a home? Yes, that was the same Bill Clinton who sees himself as another economic genius. The key word there is "toxic" which was left out of the announcement. So our government is going to buy $40 billion in toxic assets, they call them mortgage backed securities (how polite of them), until the job market shows substantial improvement. Now think about that and use your brain.

One writer who covers the economic beat made the observation that until now no central bank had tied quantitative easing to job creation. I reckon Obama will now have another "historic" first. We really don't need any more firsts after close to four years of incompetence. What is odd is that anyone would believe even for a skinny minute that QE and jobs have a link. Looking at QE1 and QE2 it is obvious that they aren't kin.

Read Between The Political Lines Please

Lets talk reality for a few. There is approximately $1.5 trillion sitting in Federal Reserve banks owned by financial institutions, not the Fed. In 2007 the amount was sitting at $13.4 billion and some change. So lets factor in QE1 and then QE2 which Obama trumpeted as the salvation of job creation and someone explain to me why the majority of the scratchola is still sitting in vaults? Must be a vast right wing conspiracy I reckon. Quick! Someone ask Hillary or maybe try Billary!

Numbers crunching confuses liberals to no end so let me get to confusing them. The time line shows that the economic crisis began in August of '07. The fed's balance sheet shows an increase of $897 billion and stands at 2.8 trillion now. Do the math and determine the percentage of increase. During this same period the BLS data shows job losses of 3.5 million jobs. The real net figure is 4.3 million jobs have been lost. The reality is that the economy kept shedding jobs until January of '10. By then 8 million jobs had been lost. During the period in question (QE1) the Fed was hip deep in "mortgage backed" securities. How deep? Try $908 billion worth of deep and moving to $1.25 trillion.

So where did it go next? Having arrived at the seventy percent mark of the QE it sat at $1.3 trillion chiseling away to $1.9 trillion. This is monetary expansion for the lay person out there. It was printed money. Eleven months out from QE2 mind you the fed decided to purchase an additional $600 billion of US Treasuries. In other words, we were buying our own debt.

Doing the math, from December of 2009 until November 2010 (QE2 was announced) the economy added a meager 969,000 jobs. Using the $1.3 trillion figure each job created came at a cost of $1.3 million. What is interesting to note is the reason the correlation doesn't apply. QE2 came at $600 billion. The job market added 3.1 million jobs though it took a long time. During a seventeen month period QE1 created a fraction of the jobs. Is there a correlation? Of course not.

Some of that was hard to follow for the mathematically challenged I know. Examining the industries that QE1 should have helped is a case study in reality. Both financial services and construction should have benefited from QE1 if it was a sound policy. The inverse occurred. From September of '08 to November of '10 construction dropped a million and a half jobs and financial services shed 450K. From the bottom until now these aren't encouraging figures but see them you must. Construction has added back 59K jobs and financial services has reclaimed 103K. Sad but true.

Any job growth that the Federal Reserve wants to claim due to QE1 and QE2 is a big lie. But then so is the Obama administration with its smoke and mirrors economic policies. You really need to understand what this is all about.

After all this humma-humma $1.5 trillion is still sitting in those vaults. Surprised? Don't be. What has the fed (central bank) primarily purchased? The amounts are $840 billion of "mortgage backed" debt and another $860 billion of government debt. Neither of those are desirable but they want to keep doing it? Why? They've run out of rabbits to pull out of the hat is why?

QE3 is a vicious circle. The truth is that the Fed is freeing up $480 billion a year thereby allowing banks to loan Uncle Sugar the churned money, Keep in mind that the federal government has a need, right this very minute to borrow about $1.5 trillion a year. Now think! Where do you think that money is coming from?

There is a foreign bank element to all this smoke and mirrors but if you got this far I don't want to blow your socks off into the next county. I just want people who claim they are intelligent to think through how an economy gets out of a recession downturn. What we have seen the Obama administration attempt to do has failed. It will fail even further if he is allowed to continue to destory our economy.

Yes, as Bill Clinton himself liked to crow, "It's the economy Stupid!"

QUOTE OF THE DAY: "The only way to change Washington, is to change the people we send there."

As Always,

The Frog Prince

He Wanted To Be Historical? He Will Be...

Remember In November!


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    • Alastar Packer profile image

      Alastar Packer 5 years ago from North Carolina

      Always enlightening read, Frog. Printing more money is not the answer, and at best is another cheap band-aid on a deep wound. Reading a new book on the Irish potato famine of the 1840s. Incredible the amount of politics and financial maneuverings, avariciousness, and incompetence involved from the promised protectors of Ireland to meet the crisis. All this of course resulted in over a million Irish starving to death and more than twice that number leaving their country for good.

    • poetvix profile image

      poetvix 5 years ago from Gone from Texas but still in the south. Surrounded by God's country.

      All this crazy printing of money will do no more than what we have already seen it do which is drive up prices for the consumer. Every dollar printed in this fashion devalues all the dollars. It's damn stupid and I don't see how anyone is still falling for it. He's got to go and all the damage he caused be reversed. God bless you, Sir Frog. Keep socking it to them!

    • drbj profile image

      drbj and sherry 5 years ago from south Florida

      I have come to the conclusion, Jim, that despite our almost 4 years of failed programs and squandered stimulus payments, America is still the most wonderful country on earth because ANYONE can be elected president.

      Oh, wait a minute . . . that's the problem!

    • nicomp profile image

      nicomp really 5 years ago from Ohio, USA

      Somebody find us a Liberal/Progressive/Democrat to explain why the feds can't create a job for each of us.

    • breakfastpop profile image

      breakfastpop 5 years ago

      It's groundhog day! Up all the way, just not beautiful or funny.

    • profile image

      Ghost32 5 years ago

      I haven't been paying much attention to how many dollars Bernanke intends to print--only to how many days until we Throw the Bums Out.

      49 as of today, and counting.

      Remember in November!

    • b. Malin profile image

      b. Malin 5 years ago

      Isn't it Sad, that 47% of Americans will not make it with out Obamaville. What kind of a Legacy are we leaving for our Great Grand Children...with the never ending Debt that continues to mount. What kind of a Life Style will they have to look forward to?

      The Government DOES NOT create jobs...The PRIVATE sector does, if allowed to...Washington, STOP restricting People.

      Good Provocative Hub Froggy.

    • nicomp profile image

      nicomp really 5 years ago from Ohio, USA

      Can we get some liberals here to explain why the gov't doesn't just create a job for everyone?

    • profile image

      Stu 5 years ago

      As the Federal Reserve itself (correctly) likes to say, "you can't push on a string." Buying private or public debt won't stimulate the economy if consumers and business are still scared to spend or borrow. The extra cash will just end up in bank vaults, or loaned back to the Federal Reserve for a 1/4 of a percent in annual interest. Further, printing money to purchase debt on the open market will be inflationary once we start to come out of the recession; business and consumers will start borrowing and spending, and the money supply in circulation will exceed our GNP's capability to support it. This will be "force multiplied" by the consequences of fractional reserve banking; money lent after the economy improves will be redosited and relent in an endless cycle, creating yet more montary float. Prices will rise, interest rates will go up, the dollar will weaken against other currencies, imports will become more expensive, and peoples' savings will be depreciated (due to higher long term interest rates). Far from easing the current recession, yet another round of QE will thus simply make emergence from recession lead to avoidable macroeconomic consequences that could easily throw us back into recession. The simple truth is that Keynesian economics is a flawed theory. It falsely assumes that the availability of money impies there is a demand for it. In reality, recessions end when businesses become more confident, and make investments that add to payrolls. At that point, the prior injection of money becomes a curse, wrecking savings values, hurting our currency, making prices go up, and hampering growth by making interest rates rise.

    • The Frog Prince profile image

      The Frog Prince 5 years ago from Arlington, TX

      Mike - The Democrats like those folks to be on their plantation. It keeps them in office.

    • profile image

      Old Poolman 5 years ago

      The effort to get as many citizens as possible on "Entitlements" AKA "Welfare", have paid huge rewards for this administration. We now have a reported 47% of our population who must vote for the current administration in order to continue this lifestyle.

      Even if it is possible to create new jobs, it will take years to wean some away from their life of "Entitlements." This 47% is growing by the day. I shudder to think what will happen when it reaches 75% and the remaining 25% are supporting everyone. I doubt that even if we raise the tax rate on the wealthy to 100% that it will be enough to pay the bills.

      A government who encourages dependence is a sad thing to see. That is not what this great country was intended to be.

    • Wayne Brown profile image

      Wayne Brown 5 years ago from Texas

      Obama and company have stagnated the private sector, buried us in debt, and now are on a mission to devalue our currency by printing gobs of money all the time justifying it on the back of the "government creating jobs"....governments do not create jobs....they destroy them, plain and simple. America could not be on a better path of destruction if one had been legislated for it....and for this, Harry Reid calls Obama, "courageous". Take a good look at Harry Reid and see the face of the man who helped sell out our country. As for Bernanke...he is just a towel boy for Obama....."another towel, sir?" ~WB

    • Angela Blair profile image

      Angela Blair 5 years ago from Central Texas

      Aha, Frog -- good one -- and I get it -- and it scares the livin' hell out of me to be absolutely truthful! Best/Sis

    • nicomp profile image

      nicomp really 5 years ago from Ohio, USA

      If the government can create jobs, then it should simply create a job for each of us. There should be zero unemployment. Obviously the government cannot create jobs.

    • WillStarr profile image

      WillStarr 5 years ago from Phoenix, Arizona

      After World War One, the German people woke up one morning to discover that the life savings they had in the bank would not even buy a loaf of bread.

      That's what inflation can do. If a gallon of gas costs $100.00, and a pound of hamburger costs $150.00, how long will your 401k last? Just because it's adequate today doesn't mean it will be adequate tomorrow. That's what is so wrong about printing money to get out of debt, but that's exactly what Obama is doing.

    • The Frog Prince profile image

      The Frog Prince 5 years ago from Arlington, TX

      Mike - Deflating the dollar means inflating everything around us that we use. The Fed has used smoke and mirrors for too long. I see the bottom of the cliff coming. People can't be that stupid. But the entitlement mentality needs to be fed or else. That's the sad part of what will happen when they have to take the goodies away. People see it now, many do anyway, as their right. What a surprise they will be in for.

      Obama and Bernanke need to go. I'm not sure which one if the more dangerous of the two.


    • profile image

      Old Poolman 5 years ago

      Hmmm - Square Peg - Round Hole. Won't fit! Oh well, let's keep trying until it works. How many times are we going to try this proven failed technique to fix the dying economy.

      Or, is this some form of blackmail against employers? They are saying, we will just keep printing money and deflating the dollar until you darn employers start hiring people again.

    • The Frog Prince profile image

      The Frog Prince 5 years ago from Arlington, TX

      CMerritt - Romney had it right when he spoke of the 47% who pay no income tax. When you have that great a percentage who don't have any skin in the game I'm not sure what else the outcome would be. If he offended anyone by saying that then the truth hurts for sure. I agree with needing to stop what is going on. We're being downgraded by credit agencies and now this? When the bottom falls out finally and we're bankrupt I can just imagine the stupid looks on the faces of the 47% of freeloaders. Romney was being nice. I'm not.

      The Frog

    • CMerritt profile image

      Chris Merritt 5 years ago from Pendleton, Indiana

      and yet 47% STILL think we will be better off, with four more years of this!.........why is it, some of us get it, and many don't?

      Well done frog!


    • Amy Becherer profile image

      Amy Becherer 5 years ago from St. Louis, MO

      Simple arithmetic, and barring that, simple logic has everyone I've heard talk about another $480 billion in debt, shaking their incredulous heads. I wonder how long I could get away with borrowing money that I promised to pay back when I could, to buy even the necessities I now go without, like health care. Oh, that's right, I wouldn't be able to find a banker to lend me money and I wouldn't ask without any intention of paying it back myself. If our government operated with a conscience, neither would they. But then, we wouldn't be in this mess and millions of American's would still have their jobs and spending power. Doesn't take Einstein to figure that out.

    • Davesworld profile image

      Davesworld 5 years ago from Cottage Grove, MN 55016

      Albert Einstein defined insanity as doing the same thing over and over expecting different results. Sounds an awful lot like current governmental monetary policy to me.