Thank God They Pay Me In Won

A day after the American voters punished Democrats in Congress for passing trillions of dollars in bailout and ineffective stimulus bills that failed to recover the economy, the Federal Reserve decided to undermine the Republicans mandate by announcing they will print 600 billion more dollars out of thin air over the next eight months.

The goal is to avoid deflation.  The Fed is doing everything they can possibly think of to depress the US dollar and weaken it against foreign currencies.  This helps American exports and the idea is that this will help get the economy going again sooner.  Interest rates for banks to borrow money is already at 0%, so the rate cannot be cut anymore.  The Fed is basically paying people money to borrow from them just so they will spend money once they have it.

A result of printing this unfathomable quantity of money is that the American people's salaries and savings (as well as their debt) becomes worth less.  Also, anyone who earns money in a foreign currency, like an English teacher in South Korea, will see their salary increase as a result of foreign currencies appreciating against the US dollar.

Expect the exchange rate to improve to 1USD = 1000W within eight months.  It might even do better than that if the Fed actually gets what it wants.

Here's a video explaing more about the Fed and its decision:

Here's an article with even more:

The Federal Reserve is trying to take out an insurance policy against the risk of deflation and a return to recession.

The price tag for that insurance: $600 billion.

That's the amount the Fed said Wednesday that it will spend over the next eight months to buy US Treasury bonds. The idea is to pump new money into a weak economy, boosting both economic growth and inflation.

Many economists expect the new policy to have a modestly positive effect on the economy, but critics say it will spark an unwelcome level of inflation without creating jobs. Reaction in the stock and bond markets Wednesday afternoon was muted, because the Fed had telegraphed its move in public statements over the past few weeks.

The central bank's policymaking committee, led by Fed Chairman Ben Bernanke, voted 10-to-1 to take new action. The bank's mandate from Congress is to seek both full employment and a stable overall price level, and the Fed said that "progress toward its objectives has been disappointingly slow."

In its statement, the Fed's policy committee said it plans to buy about $75 billion of long-term Treasury securities per month. The goal is "to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate."

The Fed's monthly purchase amounts are relatively modest, not a policy of shock and awe. The downside, for ordinary Americans, is that the policy may not provide a huge boost to growth. On the positive side, the move's modest scale shields the economy somewhat from the inflation risks that critics see in the plan.

How is it intended to work?

Economists at the investment bank Morgan Stanley, in a note to clients Wednesday, cited several channels by which the Fed's policy may help lift growth. The Fed begins by using its power to create money, and using it to buy bonds. Pumping new money into the economy can push up the price of assets (such as corporate stocks), lower the dollar's exchange rate (making US exports more attractive), and raise inflation expectations (thus reducing real interest rates). [...]

This policy of so-called "quantitative easing" has worked in the US and other nations before, they add. It's considered an unconventional policy, however, because central banks use official interest-rate cuts as their preferred policy tool. (Today the Fed's short-term interest rate is at about zero percent, and may stay there until the economy improves substantially.)

[...]

Another risk is that the influx of monetary stimulus could fuel an asset-price bubble – with unhappy consequences when it bursts. Currently, a declining dollar and low US interest rates are pushing investors toward assets in emerging-market nations.

For now, US inflation is nearly nonexistent in the overall consumer price index, although prices of commodities such as oil have been rising. The Fed views falling prices, including of assets such as houses and stocks, as something that could harm the economic recovery by making consumers less likely to spend. [...]

I think the rich will just get richer and the poor will get poorer.  Nobody thinks this will create jobs, people are just trying to inflate the stock market again.
.