08
Oct
10

1.2 Trillion in taxpayer money to make the average person’s life more expensive

According to PIMCO head Bill Gross the FED easing will come it at $100 billion per month up to a total of $1.2 trillion in treasuries to keep borrowing costs low.

http://www.bloomberg.com/news/2010-10-08/gross-says-employment-report-a-signal-for-more-fed-easing.html

This works out – I did the math – to $4,000 for each man, woman and child in the USA, assuming a population of 300 million.

Now I’m not a professional economist for either a major bond fund, nor a chief of any Federal Reserve Bank but in an economy where the main problem is a lack of “aggregate demand” (too many people don’t have enough money) my guess would be that just doling out four grand to every individual would probably do a lot more to stimulate the economy than increasing lending so the hedge funds and investment banks can gamble even more in stocks, junk bonds and commodities.

In fact, all this second round of stimulus – if it does come into being at all – will simply drive up the costs of living for the average consumer even more, increase the costs of ‘bricks and mortar’ businesses and squeeze their margins even more, effectively killing off any even nascent recovery.

So why are they doing this? Are they stupid? Corrupt? Without being privy to these backroom meetings, who knows. It could just be an outcome of the plain misguided supply-side, ‘trickle down’ ideology economics which has dominated the think tanks and university economics departments since the days of Milton Friedman. But it’s an ideology that certainly suits the class of people who are mostly in charge of running everything.

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