Wednesday, February 13, 2013
The purchase every month by the Federal Reserve Bank of $85 billion in mortgage-backed securities and U.S. Treasuries risks plunging the United States into long-term economic stagnation lasting a decade or more, warns Third District Congressman Blaine Luetkemeyer, R-St. Elizabeth, a former bank and insurance executive.
Luetkemeyer said Federal Reserve Chairman Ben Bernanke has announced the Federal Reserve intends to continue more years of his bond purchase plan from banks and other lending institutions known as quantitative easing.
With the federal funds rate set near zero, buying newly issued government bonds doesn’t affect interest rates much anymore, causing the Fed to try injecting new money into the economy through quantitative easing in another attempt to generate economic activity. That policy has loosened the nation’s grip on sound monetary policy and created what many believe to be an artificial economic recovery.
Luetkemeyer said it is the same failed policy used by the Japanese for the last 20 years.