Quantitative Crisis: Bernanke's "Stimulus" For the 1%

Search form

Quantitative Crisis: Bernanke's "Stimulus" For the 1%

Quantitative Crisis: Bernanke's "Stimulus" For the 1%
Thu, 5/30/2013 - by Mark Vorpahl

When I heard that Federal Reserve Chairman Ben Bernanke told Congress last week that it was too soon for the Fed to end its extraordinary stimulus programs, I did a double take.

"What stimulus programs?" I thought. Where are the jobs programs? Where are the "extraordinary" social services that will enable those still suffering from the effects of the Great Recession to buy more and stimulate the economy?

What escaped my attention for a moment was the fact that these words were uttered by an official steeped in the jargon of high finance and political policy — where words like "stimulus" are treated to Orwellian twists, their meaning transformed into something very different from what most people understand them to mean.

Bernanke's "Stimulus"

What Bernanke meant by "stimulus" was not programs that economically strengthen the 99%. He was referring to policies that keep interest rates low, including what is known as Quantitative Easing (QE).

QE is the Fed's practice of printing money out of nothing in order to purchase mortgage-backed securities. When the program started, the monthly amount printed was $40 billion. As incredible as this amount sounds — especially while the government plans to cut needed public programs such as Social Security and Medicare to "balance the budget" — today that amount has more than doubled to $85 billion printed a month.

Combined with these measures, the Federal Reserve is keeping interest rates ultra-low in order to encourage businesses to borrow money and expand their operations. The Fed's alleged desired outcome is to encourage banks to make more loans to the private sector, thereby encouraging economic growth and job creation.

To reach this goal, however, these policies have to be set out on the right path. Currently, they are not.

On the contrary, today's policies are guided by supply side, trickle down theories which essentially claim that the problem with the economy is that the rich aren't rich enough. If the economy is still weak, it is because not enough money has been thrown at the 1% and, therefore, more must be made available for their benefit.

A crucial detail missing in this scheme is that the wealthy already have more than enough money. Banks have $1.5 trillion in reserves, and companies have $2 trillion stashed away. They are not investing in job creating ventures because consumers don't have the money to buy their products, and there is no profit to be made from commodities that sit on the shelf.

Consequently, Bernanke's policies are, at best, as effective as pouring water on an over-saturated sponge and expecting it to get absorbed.

What have been the results of Bernanke's "stimulus"? There has been a weak upturn in job creation, falling far short of what is needed to return to the employment rate prior to the crash of 2008. In addition, the stimulus has been too weak to counter the accumulating impacts, including layoffs, of sequestration as it starts to gather steam. What's more, it is a very dubious proposition that this slight and temporary job upturn has anything to do with Bernanke's extraordinary measures at all.

Considering the trillions of dollars that have been printed by the Fed so far, these outcomes do more to discredit QE than encourage its continuation — that is, unless you are a member of the big business elite whom Bernanke aims to please above all. The Stock Market has been climbing since these programs were started.

By re-inflating the Stock Market, the Fed has created a recovery for those few at the top of the economy while everyone else continues to suffer from the effects of the Great Recession. This is because the top 5 percent owns 60 percent of the nation’s individually held financial assets, 82 percent of individually held stocks, and more than 90 percent of individually held bonds. These are the financial tools whose prices are driven up by the Fed’s "stimulus."

Quantitative Easing is a primary driver of income inequality. It is, in the words of Reason Foundation economist Anthony Randazzo, "...fundamentally a regressive redistribution program" where wealth stays at the top rather than trickling down to the rest of the economy.

It is no wonder, consequently, that the Dow spiked 125 points minutes after Bernanke announced his intention to continue QE. The Fed's stimulus policies amount to one of the most expensive forms of corporate welfare in history.

Answers?

The truth is the corporate political leadership of this country has no credible answers for reversing the economic crisis, because they continue to sustain their backers' power and the profits that created this mess. Their logic: better to continue to fatten their pockets at the expense of all than to pursue policies which address the nation's fundamental economic problems and demand that the rich and corporations pay their fair share.

Because QE prints money out of nothing, it encourages both inflation and the creation of massive bubbles in the economy similar to those that led to the current economic crisis. For Bernanke and his supporters, the risks posed by these policies are necessary dangers that must be faced to satisfy the appetites of Wall Street and big business. "Stimulus" for these dominating special interests has, in practice, meant continued high unemployment, declining wages and worker rights, as well as greater economic instability in the future for everyone else.

There are measures that can be taken to begin to reverse the course of America's broken economy. A massive federal jobs program to create full employment and raise wages is the stimulus that is needed, and the money is out there to do it. Currently deductions, credits and other tax breaks flow disproportionately to the highest income Americans. If we closed these, there would be nearly $1.1 trillion of revenue available.

In addition, not just corporate but bank tax rates should be sharply increased to pay for the economic mess that those financial institutions created. Putting those funds towards job creation, education and establishing universal healthcare would lift up the well-being and standard of living for all working class communities.

Putting such measures at center stage of the political dialogue requires more than good arguments. Fixing an economy is not like repairing a car engine where the problem can be diagnosed and quickly gotten to work on. It involves a contest of power between competing interests, that is, a struggle between the forces aligned with Labor and those allied with the corporations and banks.

We need real stimulus, not the insane schemes of the Fed. To get what we need, unity must be forged in the streets, building a social force independent of both major parties that will not compromise our needs to the interests of Wall Street.

Mark Vorpahl is a union steward, social justice activist and a writer for Workers Action and Occupy.com. He can be reached at Portland@workerscompass.org.

 

Article Tabs

Sacramento is playing host to the Occupy National Gathering just after 99Rise's state-long march ended there to protest the influence of big money in politics.

Companies that invert get all the benefits of operating in the U.S. – including purchases financed by taxpayers, while not supporting the government whose services, laws and workforce enable their profits.

America's foundations and wealthiest donors give only a small proportion of their total donations to local and grassroots organizations – furthering the divide between elite institutions and everybody else.

Former CEO Artie T. offered good benefits and fair pay – which is why employees are striking and customers are boycotting the market chain across the northeast, demanding to get him back.

The Coalition for Court Transparency, which advocates greater openness and accountability in judicial branch, launched a campaign to install TV cameras in the chambers of the Supreme Court.

From the Trans-Pacific Partnership to the Transatlantic Trade and Investment Partnership to the Trade In Services Agreement, massive trade deals are being advanced in coordination with a militarized police state.

Posted 5 days 20 hours ago

A few days after thousands marched on downtown Detroit last weekend, the city suspended mass water shutoffs for 15 days – leaving more than 15,000 households already disconnected.

Posted 5 days 20 hours ago

When a journalist in a news article refers to a woman as “strident,” you know what you’re reading is a hit piece – and that's what the New York Times produced about Occupy Wall Street activist McMillan.

Posted 6 days 21 hours ago

Reporting that CEOs in the U.K. earn 162 times more than the average worker, the High Pay Centre calls on government to put immediate caps on executive salaries.

Posted 6 days 21 hours ago

The British Medical Association joins a growing movement of institutions – including dozens of universities, foundations and even the World Council of Churches – dumping oil, coal and gas holdings.

Posted 2 days 14 hours ago

An Oxfam report reveals the scale of inequality in the U.K., as charity appeals to chancellor over tax.

Comcast is seeking approval from the FCC and Department of Justice, whose job is to make sure giant corporations aren't breaking anti-trust laws.

The action of the Arctic 30 wasn't just a protest on an Arctic oil platform. It may be prophetic of something more: the emergence of a global insurgency that challenges the very legitimacy of those who are destroying our planet.

Naveed Shinwari hasn’t seen his wife in 26 months. He suspects it’s because he refused to become an informant for the FBI.

A new poll concludes more than 60 percent of Americans would strongly support a federal law that imposes tough, new campaign finance laws for politicians, lobbyists and super PACs.

Sign Up