With at announcement Fed Chairman Ben Bernanke is signaling that he clearly understands the severity of the US economic situation and is willing to take “all” necessary action as he lives up to his nickname “Helicopter Ben.” In last week’s Federal Open Market Committee Meeting, the Fed announced that it would spend another US$1.1T to purchase debt securities, specifically Treasury notes, in open market operations. This is an extremely aggressive attempt to re-inflate the economy, and it should encourage bank lending, and the closest thing to running the US money printing press full on and throwing money out of helicopters…The consensus is that US Fed’s action will provide a necessary “kick” to the US economy and stock markets in the short term. Remember, take what the market gives.
The Big Q is that the long term effects from this action may cause even more problems. Steve Forbes once said: “If printing money alone can create wealth, then poverty stricken Zimbabwe (a country plagued by hyperinflation) would be the richest country in the world.” So in the short run, Bernanke’s actions will help stimulate the economy and the stock market, but the long-term picture isn’t bright.
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