Thursday, November 4, 2010

Bernanke and the Fed's 600 Billion investment in Treasuries

Stocks rally around the world after Fed action
To read Yahoo Business News article click "Stocks Rally" above.

I agree with Ben Bernanke's investment of 600 billion dollars into Treasuries and so do the world stock markets today. It is the last bet of our nation that it can stem the tide of unwanted deflation like Japan experienced starting in the 1990s which effect is much much worse than inflation in the overall scheme of things like jobs and the valuation of real properties.

So, as jobs increase (hopefully) from this investment and the likelihood of deflation tumbles along with this so does the value of the dollar (some say as much as 3.7% against the New Zealand currency) the cost of our goods to other nations decreases which increases the likelihood that all nations will buy more of our goods.

The most likely to be hurt (in a direct way) are the poor and lower middle class as the value of their monies decrease in value on the world stage because anything they want to buy from outside the nation will cost between  1% to 3% or more in the coming year just in direct import cost changes from the devaluation of the dollar because of printing 600 billion new dollars to buy the treasuries.

However, business and stockholders in general of Multinational blue chip stocks will benefit much more than the lower and middle class will be hurt by products from China and Japan (for example) costing more and more. But the poor and lower middle class will be helped in getting and keeping jobs at the same time so I think people getting jobs with export companies will increase a lot during the next year here in the U.S.

So, overall for both the U.S. economy and the world, the Fed's pumping 600 billion new dollars into Treasury purchases will likely permanently? pull us out of a deflation potential spiral at least at this time this year for a few years.

So, as the Fed has weighed the dangers of not doing this against the danger of doing this I think we have a win win situation for both the U.S. economy and the world economy all at once.

Also, the Fed really had no choice once it viewed the potential for gridlock and the loss of capacity for getting anything at all done with the Senate Democratic controlled and the House Republican controlled. The last time a Democratic President was in place for something like this it was Bill Clinton and Newt Gingrich was the Speaker of the House. Nothing really happened during that time but Lewinsky and Clinton and Newt shutting down the National Parks and other parts of funding due to budget disagreements and then the stupid Whitewater mess. Nothing at all really got done. However, business loved this time of Gridlock because nothing unpredictable business wise happened. So, business had unprecedented growth during this last Gridlock time. Let's hope business takes advantage of this gridlock too and makes the U.S. Prosperous once again and puts as many people as need jobs to survive back to work.

No comments: