By Jon Hilsenrath and Luca Di Leo
28 April 2011
The Wall Street Journal
Excerpts from article:
The Federal Reserve used its first-ever news conference to signal it will phase out a controversial program of pumping money into the financial system -- and to reassure a skeptical public that the central bank is doing everything it can to control inflation and expand an uneven recovery that has yet to reach many Americans.
By ending the bond purchases, the Fed has effectively decided that it won't do more to boost growth, even though the economy appeared to stumble during the first quarter. Fed officials now will turn their attention to when the central bank might start raising interest rates. Mr. Bernanke made clear he isn't inclined to do that for a long time, unless the inflation outlook worsens.
Critics say the Fed is hastening the dollar's decline by flooding the financial system with so much of the currency through its bondbuying programs.
The Commerce Department is expected to report Thursday that the economy grew slowly in the first quarter, at a subpar annual rate of less than 2% -- a condition that could justify leaving rates very low.
Ending the bond-purchase program in June is now its next order of business. The Fed first announced its bond purchases in November 2008 as one of its many untested attempts to fight the financial crisis. It ramped up the program in March 2009, allowed it to expire, and then resumed it in November.
Fed officials for the most part believe the multiple rounds of purchases -- known as quantitative easing -- helped to ease financial conditions, lift the economy and fight off the threat of deflation, a decline in the overall level of prices. The latest round was accompanied by a soaring stock market and falling unemployment. But the Fed's skeptics say the bond-buying program failed because it helped to push down the dollar by pumping so much of the currency into the economy and pushed up commodities prices, breeding inflation risks.
Printing ridiculous amounts of paper money to give your government purchasing power it does not have while not having to take out more loans to payback with more money printed that will not have to be paid back. This is the process that has created the debt. Since O has been in office the debt has soared and he makes no apologies for it - which is in step with the liberal democratic party. The result nations look at our worthless currency then see the staggering amount of it that has been printed and make the completely reasonable judgment that it is worth less than there own currency and wa-la the US dollar is devalued and there begins the mighty steep and slippery slope.