Quantitative Easing QE2 will break the back of the U.S. Dollar
Millions of Americans have no idea what Quantitative Easing (QE) is or how it will affect them personally.
Quantitative easing (QE) is a monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of the banking system, generally through buying of the central government’s own bonds.
Economist Michael Hudson calls Quantitative Easing “a form of financial aggression.” But Hudson probably understates the case; “monetary terrorism” (moneterrorism?) is probably closer to the truth.
The new round of quantitative easing announced last week, dubbed ‘QE2’ by economist wonks, according to Ben Bernanke is supposed to address what he wrote in an op-ed : “the job market remains quite weak; the national unemployment rate is nearly 10 percent, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer. The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skill.”
To solve the above problems, Bernanke’s FED is going to print more money. And Emerging Markets will print, too. Mass competitive devaluation will ignite a full-blown currency war that leaves the present trade regime in tatters and the dollar in the dustbin.
Writes the UK Telegraph‘s Ambrose-Evans Pritchard: “The Fed’s QE2 risks accelerating the demise of the dollar-based currency system… a chorus of Chinese officials and advisers is demanding that China switch reserves into gold or forms of oil. As this anti-dollar revolt gathers momentum worldwide, the US risks losing its ‘exorbitant privilege’ of currency hegemony.”
Nobel prize winner, Joseph Stiglitz, adds: “The world is on the verge of moving to another regime of managed exchange rates and fragmented capital markets….With such a system, the US would no longer enjoy the extraordinarily cheap borrowing that comes with being the minter of the most important global reserve currency. But the current arrangement is an anomaly. The world is at a critical juncture.”
It won’t happen overnight, but the transition away from the dollar has already begun. Bernanke’s misguided hyper-monetarism is merely hastening the dollar’s decline. QE2 could very well be the straw that breaks the camel’s back.