Courtesy of Pam Martens.
Senator Pat Toomey Questioning Janet Yellen at Her Confirmation Hearing
This time around, Republican members of the U.S. Senate Banking Committee want to go on record that they not only see a train wreck coming from the Fed’s easy money policy, but have described it in unmistakable terms to Janet Yellen, the President’s nominee to lead the Federal Reserve.
During the recent Senate Banking confirmation hearing of Yellen, three Republican Senators were particularly outspoken about the dangers lurking in the Fed’s policy of pumping $85 billion a month, a whopping $1.02 trillion a year, into Wall Street coffers via bond purchases from the Street. The policy is known in Wall Street jargon as QE3, shorthand for Quantitative Easing, round 3. By preventing a surplus of bonds on the Street, the Fed is keeping interest rates artificially low in hopes of stimulating economic recovery. The flip side of that effort, however, is to flood Wall Street with the funds to engage in higher risk investing.
Senator Pat Toomey, a Republican from Pennsylvania, told Yellen:
“We are punishing middle class savers for years now. People who spent an entire working life time choosing to forego consumption because they decided they would save, and they would have a little sum, a little bit of income in their retirement; and now they have no income because they earn nothing on their savings. But they do watch as it gradually gets eroded even by a low level of inflation when they have no income from it. We have exacerbated the problems of underfunded pension plans, and we’ve got distortions in financial markets.”
Toomey added that while these were obvious worries, what worried him even more was what would happen when the Fed cuts back on its QE3. Toomey characterized his concern as “what happens when this morphine drip starts to end”?
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