FED announcement of QE3 proves America is not on the right track

By Congressman Steve Pearce
Sep 14, 2012

Most Americans will not know that the Federal Reserve (the Fed) announced what is known as QE3 today, or what QE3 even means for everyday life.  Today’s announcement solidified that President Obama has failed to get the economy on the right track.

So what is Quantitative Easing?  The Fed has used its conventional tools and the economy is still stagnate, meaning they have to turn to other devices.  Quantitative easing is considered “unconventional,” and is used by the Fed when their other alternatives have not worked. 

Because the Fed can create money out of thin air by simply printing it, they buy long term assets like Treasury securities or mortgage backed securities with it.  This puts the newly created money into the banking system which drives down interest rates, hurting those people who have saved for a lifetime in interest bearing accounts.   A second downside to quantitative easing is that it can also cause inflation, which Americans are already experiencing now with higher prices for everything from gas to groceries to utilities.   

With two rounds of quantitative easing already behind us, a third round indicates the first two didn’t work and makes rising inflation a more serious prospect. 

The real issue at hand is why the Fed has to manipulate our money.  The answer is simple- the failed economic policies of President Obama.  Despite all his promises to strengthen the economy, the unemployment rate is still 8%, home values continue to decrease, household income declined for the second year in a row, and the highest number of Americans are on food stamps, ever. 

What Americans need are jobs, not higher inflation and unemployment.  When we stop saddling job creators with new regulations and stop threatening them with higher taxes, there will be less uncertainty about the economic future and they can start investing in their businesses again. 

 

Congressman Steve Pearce represents the 2nd District of New Mexico andserves on the House Committee on Financial Services.