What could possibly go wrong with Ben Bernanke’s latest quantitative easing scheme?
The Fed chairman’s decision last week to continue printing money indefinitely — or until he decides the economy is expanding enough — could cause a whole lot of bad things to happen, not the least of which is to render the US currency worthless.
If the dollar does go down significantly against major world currencies it will not only cause no small amount of embarrassment for our country but will make it nearly impossible to find foreign buyers for our bonds.
If foreigners, especially governments like China, decide to boycott US bond purchases then interest rates will rise and Bernanke will have achieved the opposite of what he really wants.
And when it comes time for Bernanke to reverse the effects of QE — namely, sell the bonds he’s now buying — interest rates could skyrocket. In fact, the idea of just throwing the bonds purchased by the Fed onto a bonfire isn’t out of the question.
But none of that is really what you care about, so let’s concentrate today on the price of gasoline.
Bernanke’s first two quantitative easing experiments had a limit — as in, we’re only going to print a certain amount of money over a certain period of time.
The purpose was to make it look like there were actual buyers for our government’s debt without exposing the shill purchases being made by the Fed.
Investors, however, understand everything I just told you. That’s why people right now are putting their money into real assets — gold, real estate, art, pig farms (maybe) and commodities (definitely).
That gets me to the price of gasoline.
The price of crude oil touched $100 a barrel right after Bernanke’s announcement last week. It has since fallen about $8, partly because the economy continues to look weak enough to curtail energy use but also because governments are trying desperately to keep the price down.
Keep in mind that the price of oil — and what you pay for gasoline — is rising at a time of the year when costs should be going down. The so-called “peak driving season” is over in the US, and the economy, if anything, is weakening.
So gasoline stockpiles are healthy even though refineries aren’t working hard to keep them that way.
On top of that, auto makers have been increasing the fuel efficiency of their cars — a fact that could eventually break our dependence on foreign oil.
As I’ve been saying for too long, you can blame Wall Street speculators — including pension funds desperate for better returns — for the fact that the average price of gasoline will probably soon reach $4 in the US.
But speculators are really being motivated by what the Fed is up to. And it’s up to no good.
Bernanke has managed to get interest rates down to dirt-cheap levels. But that hasn’t helped the US economy, which is barely growing and could very well already be in another recession.
And despite a positive jump in existing home sales reported yesterday by the National Association of Realtors (a group that had to revise its sales figure downward by a massive amount not too long ago) even the housing market hasn’t benefited much from Bernanke’s efforts. Most of the sales improvement seems to be coming from investors looking for bargains.
The Fed itself reported earlier this week that mortgage lending fell to a 16-year low in 2011, despite the lower borrowing costs. And just yesterday it was reported that builders weren’t starting new housing construction at the levels expected.
But the worst effect of all from Bernanke’s policies is this: people who rely on the income from their savings are getting squashed from both ends: — higher gasoline prices and lower return on their savings.
Welcome to Quantitative Easing Ad Infinitum.
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Facebook still thinks pedophilia is an appropriate subject for humour (its spelling) despite the fact that this perverted view is bothering advertisers.
One reader who got back to me said he contacted MasterCard and was informed that the credit-card company had expressed its concerns to Facebook. The reader also protested directly to Mark Zuckerberg, the founder of Facebook at http://www.facebook.com/zuck
Facebook is refusing to take down a page titled “Pedophiles are people too” because it agrees with the page’s author, who views discussions about sex with children as nothing more than “controversial humour.”
Meanwhile, in one of the funniest corporate blunders I’ve witnessed lately, American Express will be traversing Staten Island today — hand in hand with Facebook — trying to teach small companies how to use social media to their advantage.
Two weeks ago Staten Island Borough President James Molinaro called for a boycott of Facebook over the pedophile page. AmEx must agree that pedophilia is something to chuckle over because when I asked for a comment the company didn’t express the least little revulsion at the pedophile page.
“It is not appropriate for us to comment on Facebook’s policies and practices,” said an AmEx spokesman.
By not even chastising Facebook, American Express by default is agreeing that there is nothing wrong with something that is a crime.
Give American Express a call — (212 640-1712) — and let the company know what you think.