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SCHWARTZ: The Fed keeps on printing money
Hurting the middle class
Question of the Day
Two weeks ago, Federal Reserve Chairman Ben S. Bernanke announced the purchase of $40 billion worth of mortgage-backed securities per month for an indefinite period of time. This debt acquisition is known as quantitative easing, or QE.
At the direction of the Fed, the U.S. Treasury will print $40 billion per month that previously never existed to buy mortgages that have no market value. In layperson’s terms, your neighbor, who bought a house he couldn’t afford with little equity down, will be getting a bailout from the Fed. What’s more, because of this mass printing of dollars, inflation will rise, your paycheck will be worth less, and it will cost more to buy groceries and fill up the gas tank.
Inflationary and money-printing policies like QE always hurt the middle class. High inflation also causes uncertainty in the business world, which will lead to more layoffs and higher unemployment.
The inevitable results of QE will damage the earning power of the most productive working-class Americans. When the dollar loses value because of inflation, it’s the equivalent of a tax on those who can least afford it. Wealthy Americans aren’t nearly as susceptible to the pitfalls of high inflation. Many of them can afford to hedge against a less valuable dollar by investing in gold, real estate and other commodities that protect and insulate them. The middle class gets stuck with a smaller paycheck, a higher grocery bill and the threat of lost jobs.
The latest QE policy also has a goal of bailing out millions of bad mortgages. One out of five homeowners is underwater, saddled with a loan worth more than the house in which they reside. Bailing out these folks won’t help the economy and will do nothing more than pit neighbor against neighbor.
While there certainly have been instances of loan fraud and crooked mortgage banking practices, it’s not fair to punish all those who’ve worked hard and played by the rules by forcing them to pay for those who didn’t. Most middle-class Americans work all of their lives to build equity in their homes. To give some Americans a bailout by stealing from other industrious individuals is bad policy, unfair and will create even more division in an already divided country.
The worst part is there’s nothing we can do to stop it right now. The Fed is not responsible to the American people at all. In fact, it isn’t responsible to anyone: The Fed is a central bank that operates independently and without any transparency to the American people.
Most Americans have never even heard of the Fed and have no clue as to what it does or how it impacts our lives. Mr. Bernanke and President Obama like it that way. Unpopular policies that hurt working-class Americans, like QE, can be implemented through this shady institution with no political fallout whatsoever. Rep. Ron Paul, Texas Republican, and other conservatives in Congress have been fighting to expose the Fed, and many liberty-loving activists have even called for eliminating the institution.
One thing is for sure: The Fed has no constitutional role in our government and shouldn’t be allowed to implement massive, unpopular bailouts with no accountability. Unfortunately, that’s exactly what Mr. Bernanke and Mr. Obama have done with the implementation of QE — a policy designed to hurt America’s middle class and destined to fail.
Dave Schwartz is the state director of Americans for Prosperity-Maryland.
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