QE3: The Magic of Money

So everyone knows that the US is extremely in debt but not much is being done to alleviate the issue. Because we are so much in debt, we are now using quantitative easing (QE), again. Since we’re now on QE3, do you think QE1 or even QE2 worked? Not at all, hence why we’re on the destined to fail QE3.

So what is QE?

Quantitative easing is when the federal government needs money so they just create it out of nothing. The goal of quantitative easing is to lower interest rates, boost demand for investment capital, and increase economic output.

There are, however, negative effects to quantitative easing such as a weaker dollar. This is no doubt good for an indebted economy and for one coming out of a recession, but it’s not ideal for individuals who will have less purchasing power. With a weaker dollar, individuals will no longer be able to buy what they once did for the same price. Also, a weak dollar causes the price of global commodities to increase, which makes it more expensive for US manufacturers to produce anything. Productivity creates wealth, so producing less will not only increase unemployment but also put us more in debt. A drop in the US dollar also results in an increase in gasoline and other luxury commodities due to a lot of them being priced in the US dollar. While many economists fear inflation as a result of using quantitative easing, deflation remains to be a main concern.

Creating money isn’t the only way the government has tried to alleviate the deficit, if you can even call it alleviation. They borrow the money from other sections of the government. For instance, if the Treasury needed money (let’s say $50,000) they would just borrow it from the Federal Reserve and if the Federal Reserve needed money they would just say, “Hey, Treasury, we know we loaned you that $50,000 but now we need it back.” I doubt it would be exactly like that but the concept is the same. My Economics teacher said that it’s like using your Mastercard to pay your Visa and your Visa to pay your Mastercard.

http://usdebtclock.org

The numbers won’t appear when the page is copied.

The above link shows- in real time- the current national debt and it’s obvious to see that the numbers drastically increase every second. Currently, the US public debt is situated at above $16 trillion; the total debt is above $58 trillion; and unfunded liabilities such as Medicare, Medicaid, and Social Security is way above $120 trillion. As you can see, the problem isn’t taxes, it’s that the government spends too much. Earlier I said QE3 is destined to fail, but that’s because we won’t get out of debt unless we reduce spending.

Politicians always talk about cutting government programs but the truth is, no one ever cuts government programs. In fact, no one can cut government programs. When politicians talk about cutting government programs what they’re really talking about is reducing the rate of increase. Because of the base-line, all government program expenses increase by 3-12% annually. So, when people”cut” governement programs what they really do is reduce the rate of increase from say 8% to 5%.

Some of our highest expenses are Medicare/Medicaid and Social Security and by 2016 our national debt is expected to be above $22 trillion. Don’t believe me? It’s all on the US debt clock.

Why are we so in debt?

We’re in debt for a plethora of reasons but some are way more ridiculous than others. Here are a few things that the government is using our tax dollars for:

$50,000 for a helicopter for a small-town sheriff in Kentucky.

$98,257 for a shuttle in D.C.- Congressman James Moran’s grandmother wanted to go to downtown DC but she didn’t want to drive so Congressman Moran had a shuttle stop right in front of her house to go downtown.

$200,000 for a tattoo removal program in California.

$500,000 to maintain a WW1 statue… in France.

$1.24 million for tree snake control…in Guam.

$1.9 million for water taxi service at Pleasure Beach, CT

$3 million for a project to distribute NASA images

$3.8 million to save part of a baseball stadium from demolition… for the memories

$4.2 million for a local weapons of mass destruction support team

$9.7 million to save Hawaiian sea turtles, monk seals, and crustaceans

$15 million gift for Ireland

$27 million for a Tennessee-based homeland security program (not supported by the Department of Homeland Security)

$27.8 million to build fitness centers at three military bases

$44.2 million to build chapels at six military bases

$1.2 million to study the breeding habits of the woodchuck.

$500,000 for oyster safety in Florida

$413,000 for peanut research in Alabama

$165,000 for maple syrup research in Vermont

$727,000 to compensate ranchers in Wisconsin, Minnesota and Michigan whenever endangered wolves eat their cattle

Sources:

http://www.businessinsider.com/the-worst-pork-of-2010-2010-4?op=1#ixzz28NHCUEF5

Read More on http://www.cagw.org/reports/pig-book/2009/

And while the government is spending all of that money on these seemingly ridiculous projects, we’re running out of money for Medicare and Social Security, with Medicare being expected to run out of money before Social Security.

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About Sierra

I'm an accounting major at Texas State University with a passion for all things international. I'm going to learn Russian, Portuguese, Italian, and possibly German one day. I've been speaking Spanish for 8 years and my dream is to one day travel across Latin America. DREAM Act 2015!

Posted on October 4, 2012, in Entertainment and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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