An Education from Critters...

I came across a great video (link below). While sarcastically funny, these cute little cuddly animated creatures give us an awesome education in Quantitative Easing and the Federal Reserve and drive the point home of the ridiculousness of the Fed system. If you have 7 minutes, this is a great watch!

Here’s a little description of some of the concepts and ideas talked about for background if you need it:

Quantitative easing – A.K.A. “printing money”, “goosing the economy”, “laundering money” - Here's how it works: The Fed buys Treasury bonds from banks, providing them cash to lend to customers (where does the cash come from? Why, newly printed money, of course!). Buying so many bonds also lowers interest rates because demand for Treasurys leads to higher prices and lower yields. Interest rates are linked to yields. Lower rates encourage people to borrow money for a mortgage or another loan. At the same time, lower interest rates make relatively safe investments like bonds and cash less appealing, so companies and investors take the cash and buy equipment or other investments, like stocks. The S&P 500 takes off and Americans celebrate with a shopping spree. Businesses see a rise in sales and begin hiring again, and a virtuous cycle of more spending and more hiring ensues…so the theory goes. Read my last post here if you want more.

CPI – Consumer Price Index – a measure of inflation / deflation – an index comprised of a basket of consumer goods and services that takes into account the price of those goods and services. As the price of those goods rise and fall collectively, the measure of the CPI rises and falls. As our cute animated friends allude to, the CPI doesn’t always match up with reality. After all, the CPI is a government statistic produced by the Bureau of Labor Statistics (BLS)…think there’s any chance that the government could alter the statistic to say what they want it to say?

Deflation – A decline in general price levels.

Inflation – An increase in general price levels. In an inflation environment everything gets more valuable except the value of money.

“The Ben Bernake” – Chairman of the Federal Reserve. In the video they pronounce it Ben “Burr-nack”. Unless you want to be made fun of intellectual circles, it’s actually pronounced – Ben “Burr-nack-EE”.

And now, to the video! Click on the link below...enjoy!

http://www.youtube.com/watch?v=PTUY16CkS-k