Monday, February 9, 2009

What happened to Bernanke's quantitative easing?

Remember how they were going to lower mortgage rates with their buying? They've gone from 5.04% to 5.51% the last month.

How about ten year bonds? That rate went from 2.08% to 2.96%, and now we have official voices in China stating that they want to dump their paper.

Bernanke has bought $92 billion of mortgages securities since the start of the year.

So much for "quantitative easing!"

But if you still don't think Bernanke is overmatched, read his book, Essays on the Great Depression.

So we have an economist from Princeton running the Federal Reserve. Which is why people think jokes like these below are funny.

Two balloonists on a transcontinental voyage ran into low cloud and were blown off course. Drifting near the ground, they spotted a man walking below. One of them asked where they were. The man replied: "In a balloon." The man who had asked the question turned to his fellow traveller and said:

"We must be near a university. I just spoke to a vice-chancellor." "How did you know he was a vice-chancellor?" his companion asked. "Because he spoke with a firm sense of authority and gave us information that was completely accurate and completely useless."

There was an economist who visited a successful welfare reform program in the inner city. He met all these mothers telling him about the free day care and job training which allowed them to go to work and get off the dole, the program that allowed them to take college classes on the weekends, and all the other great aspects of the program. The director of the program, beaming, told the economist "see how well this works in practice?".

The economist replied "yes, but does it work in theory?".

So tomorrow, we'll see the bank bail-out plan, that the economists from Treasury say will work in theory.

It'll work in theory, as long as the taxpayer takes the hit, and private capital gets the reward!

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