The Federal Reserve under the quantitative easing policy increased the money supply dramatically. In layman terms it’s generally called printing money. So we have a question we would like you to answer. Where is this money going to eventually end up?
See right now the banks are still not lending money out, so it hasn’t hit Main Street but it just takes a handful of bankers to loan those newly printed dollars to a handful of companies to start it moving. As of right now with unemployment in double digits (17.3% according to the U-6) you can’t take the money out of the economy now due to inflation fears. The last time this was done on a dramatic scale back in the early 1980′s to take out the 1970′s era inflation it caused mass unemployment.
In other words this is not doable now.
In the 1990′s it was the .com bubble, in the 2000′s it was the real estate bubble. We’re not sure what it is going to be in the 2010′s, but we are highly confident that it will end up in some sort of bubble. Even The Onion, the most sarcastic parody paper the world understands this fact.
“Every American family deserves a false sense of security,” said Chris Reppto, a risk analyst for Citigroup in New York. “Once we have a bubble to provide a fragile foundation, we can begin building pyramid scheme on top of pyramid scheme, and before we know it, the financial situation will return to normal.”
Yea sarcastic, but true.
Honestly we know you understand this too. It’s why you printed off all those dollars, so someone comes up with an idea that everyone invests in, hires and grows some bubble like industry. Just like the .com boom in the 1990′s and the housing boom in the 2000′s. You’re problem is taking that money out in a fashion that wouldn’t completely destroy any economic recovery and would halt inflation.
If you start taking the money out by raising the interest rates, you are going to increase unemployment dramatically in our current super weak economy. If you don’t you are eventually going to cause extreme inflation.
So what’s the exit plan? We sort of need to know, we have kids to feed.