Rush Limbaugh received a call today from an impertinent listener who suggested that the sequester hubbub about cutting spending by $85 billion a YEAR was completely meaningless since the Federal Reserve has been buying securities in similar amounts every MONTH in the various quantitative easing iterations. We could cut the spending, the caller suggested, and just turn around and recreate the money since the Fed is doing it all the time anyway and no one would ever be the wiser.
The caller was correct, but Rush was completely nonplussed and nervously dismissed the call and cut to commercial (which is why all calls are taken just before commercial breaks, in case they go Egypt). Since I can't find a record of it in the transcripts tonight, I'm guessing it really did disturb Rush enough to make sure the memory of it went straight into the circular file.
But think about it. The Democrats, especially Obama, are screaming the spending cuts are draconian and will hurt necessary jobs and the economy's growth. The Republicans are screaming that unless we cut spending, the world as we know it may come to an abrupt end because of the way a huge mountain of debt threatens to crush growth. Meanwhile the Federal Reserve has expanded its balance sheet from about $500 billion before the crisis to $3 trillion today by purchasing all manner of MBS and Treasury securities and what have you. Over four years that comes to a rate of about $52 billion a MONTH of funny money fed intravenously into the banking sector because it is still as good as dead in its bed.
That threatens everything Rush believes and says about the banks, how they were forced to take TARP, didn't really need it, paid it all back, are now healthy, blah blah blah. When the real story is that the losses they have taken on housing are gargantuan and have left huge holes in their balance sheets (you know, the off-balance-sheet-balance-sheets). The virtually free money from the Fed is designed to help them profit to get back on their feet. For public consumption the Fed says it is doing this to make mortgages cheaper so that housing revives, so that employment revives, neither of which is the real reason. The real reason is to throw banks a life line to allow their private trading desks to make money speculating in the stock markets et alia and restore their capital base.
It's government of the banks, by the banks and for the banks. The rest is just a sideshow.
