Six Good Paragraphs

From Thomas Sowell’s recent column:

When people in Washington start creating fancy new phrases, instead of using plain English, you know they are doing something they don’t want us to understand.

It was an act of war when we started bombing Libya. But the administration chose to call it “kinetic military action.” When the Federal Reserve System started creating hundreds of billions of dollars out of thin air, they called it “quantitative easing” of the money supply.

When that didn’t work, they created more money and called it “quantitative easing 2” or “QE2,” instead of saying: “We are going to print more dollars– and hope it works this time.” But there is already plenty of money sitting around idle in banks and businesses.

The policies of this administration make it risky to lend money, with Washington politicians coming up with one reason after another why borrowers shouldn’t have to pay it back when it is due, or perhaps not pay it all back at all. That’s called “loan modification” or various other fancy names for welching on debts. Is it surprising that lenders have become reluctant to lend?

Private businesses have amassed record amounts of cash, which they could use to hire more people– if this administration were not generating vast amounts of uncertainty about what the costs are going to be for ObamaCare, among other unpredictable employer costs, from a government heedless or hostile toward business.

As a result, it is often cheaper or less risky for employers to work the existing employees overtime, or to hire temporary workers, who are not eligible for employee benefits. But lack of money is not the problem.

Great Explanation of QE2

Here’s the best explanation I’ve seen on Quantitative Easing from Steven Landsburg.   I recommend reading the whole post, but if you are curious about what exactly QE is, here it is in a nutshell:

They’re creating 600 billion new dollars and using those dollars to pay down the government’s debt.

The rest of Landsburg’s post does a great job of explaining potential results of this action.

If I understand it correctly, the net effect will likely be the transfer of wealth from those who are holding to dollars to the folks who sold their bonds back to the government.

Thanks to Steven Landsburg for taking the time to explain this.