Ben Bernanke and the Federal Reserve Cause United States to Lose AAA Credit Rating
On Friday August 6, 2011, Standard & Poor's downgraded the United States credit rating from AAA to AA+. The downgrade marks the first time in United States history that the USA has had its credit rating cut.
Why the United States Lost Its AAA Credit Rating
In cutting the United States credit rating, Standard & Poor's cited that the Obama Administration and Congress had not gone far enough in spending cuts to reduce the massive record budget deficits. What Standard & Poor's does not say is why the United States has massive record budget deficits today. The answer is that the actions of Ben Bernanke and the Federal Reserve have caused the United States to have massive record budget deficits.
The Federal Reserve Caused the Great Recession
The Federal Reserve, with Ben Bernanke at the helm from February 1, 2006, caused the Great Recession by selling nearly $750 billion dollars of assets, prior to the beginning of the Great Recession. By selling assets, the Federal Reserve drained liquidity out of the economy, and that is what caused the Great Recession.
When the Federal Reserve sells assets in the economy, the purchasers of those assets pay the Fed cash for the purchases. Cash which goes into the Federal Reserve's coffers, and is no longer part of the economy. When that happens, liquidity is drained from the economy.
The Federal Reserve Lowered Interest Rates Too Much
Since causing the Great Recession, Ben Bernanke and the Federal Reserve have foolishly lowered interest rates to record artificially low levels. With interest rates at record artificially low levels, the money supply in the United States is unable to grow of its own accord. Without money supply growth, unemployment remains high, and economic growth remains low and stagnant.
In order to have economic growth, an economy must have a money supply that is growing. When the money supply does not grow, money in that economy will gain in value, and people living in that economy will spend and borrow money at levels too low to foster economic growth.
The Federal Reserve is Preventing Economic Growth
This is exactly what is happening in the United States today, and it is happening because Ben Bernanke and the Federal Reserve are causing it to happen. By keeping interest rates at artificially record low levels, the Federal Reserve is preventing the money supply in the United States from growing of its own accord.
The main way a money supply grows of its own accord is through the interest that lenders receive from borrowers. Today, due to the artificially record low interest rates engineered by the Federal Reserve, lenders are earning very little interest on their money. The interest being paid, especially on short term money, like checking and money market accounts, is just too low to cause the money supply to grow.
Without growth in the money supply, the value of money itself increases. As money gains in value, Americans are borrowing and spending money at levels that are too low to foster any kind of real, sustainable growth.
A money supply can also grow when the government, in this case the Federal Reserve, prints money. With their quantitative easing programs, QE1 and QE2, the Federal Reserve printed money and released it into the money supply by buying government debt. The Fed paid for the debt with the newly printed money, thereby increasing the money supply.
With interest rates at artificially record low levels, as soon as the Federal Reserve stops releasing money into the economy, the money supply stops growing again. Without money supply growth, people are slowing their spending and borrowing, and economic growth is slowing or stopping altogether.
Ben Bernanke and the Federal Reserve Caused the Great Recession and are Preventing Economic Growth
The Federal Reserve caused the Great Recession by draining liquidity out of the United States economy. That spurred massive government borrowing to try and stimulate economic growth (which does not work). Since causing the Great Recession, Ben Bernanke and the Federal Reserve have follishly lowered interest rates to record artificially low levels. Levels which are so low they prevent any type of natural money supply growth to occur.
Without money supply growth, unemployment levels have remained high and economic growth levels have stagnated. Both of which have made it very difficult for the government to deal with the massive record budget deficits the United States has today.
Ben Bernanke and the Federal Reserve Caused the United States to Lose Its AAA Credit Rating
As a result of the massive budget deficits, which came about due mainly to decisions made by Ben Bernanke and the Federal Reserve, Standard & Poor's downgraded the United States credit rating from AAA to AA+. Ben Bernanke and the Federal Reserve caused the United States to lose its AAA credit rating.
For more and background see Ben Bernanke and the Federal Reserve are Killing the World Economy
Federal Reserve Preventing Job Growth by Keeping Interest Rates Too Low
Real Questions for the Federal Reserve
Low Interest Rates Cause Low Real Economic Growth
Are We Headed for Deflation?
Why the United States Lost Its AAA Credit Rating
In cutting the United States credit rating, Standard & Poor's cited that the Obama Administration and Congress had not gone far enough in spending cuts to reduce the massive record budget deficits. What Standard & Poor's does not say is why the United States has massive record budget deficits today. The answer is that the actions of Ben Bernanke and the Federal Reserve have caused the United States to have massive record budget deficits.
The Federal Reserve Caused the Great Recession
The Federal Reserve, with Ben Bernanke at the helm from February 1, 2006, caused the Great Recession by selling nearly $750 billion dollars of assets, prior to the beginning of the Great Recession. By selling assets, the Federal Reserve drained liquidity out of the economy, and that is what caused the Great Recession.
When the Federal Reserve sells assets in the economy, the purchasers of those assets pay the Fed cash for the purchases. Cash which goes into the Federal Reserve's coffers, and is no longer part of the economy. When that happens, liquidity is drained from the economy.
The Federal Reserve Lowered Interest Rates Too Much
Since causing the Great Recession, Ben Bernanke and the Federal Reserve have foolishly lowered interest rates to record artificially low levels. With interest rates at record artificially low levels, the money supply in the United States is unable to grow of its own accord. Without money supply growth, unemployment remains high, and economic growth remains low and stagnant.
In order to have economic growth, an economy must have a money supply that is growing. When the money supply does not grow, money in that economy will gain in value, and people living in that economy will spend and borrow money at levels too low to foster economic growth.
The Federal Reserve is Preventing Economic Growth
This is exactly what is happening in the United States today, and it is happening because Ben Bernanke and the Federal Reserve are causing it to happen. By keeping interest rates at artificially record low levels, the Federal Reserve is preventing the money supply in the United States from growing of its own accord.
The main way a money supply grows of its own accord is through the interest that lenders receive from borrowers. Today, due to the artificially record low interest rates engineered by the Federal Reserve, lenders are earning very little interest on their money. The interest being paid, especially on short term money, like checking and money market accounts, is just too low to cause the money supply to grow.
Without growth in the money supply, the value of money itself increases. As money gains in value, Americans are borrowing and spending money at levels that are too low to foster any kind of real, sustainable growth.
A money supply can also grow when the government, in this case the Federal Reserve, prints money. With their quantitative easing programs, QE1 and QE2, the Federal Reserve printed money and released it into the money supply by buying government debt. The Fed paid for the debt with the newly printed money, thereby increasing the money supply.
With interest rates at artificially record low levels, as soon as the Federal Reserve stops releasing money into the economy, the money supply stops growing again. Without money supply growth, people are slowing their spending and borrowing, and economic growth is slowing or stopping altogether.
Ben Bernanke and the Federal Reserve Caused the Great Recession and are Preventing Economic Growth
The Federal Reserve caused the Great Recession by draining liquidity out of the United States economy. That spurred massive government borrowing to try and stimulate economic growth (which does not work). Since causing the Great Recession, Ben Bernanke and the Federal Reserve have follishly lowered interest rates to record artificially low levels. Levels which are so low they prevent any type of natural money supply growth to occur.
Without money supply growth, unemployment levels have remained high and economic growth levels have stagnated. Both of which have made it very difficult for the government to deal with the massive record budget deficits the United States has today.
Ben Bernanke and the Federal Reserve Caused the United States to Lose Its AAA Credit Rating
As a result of the massive budget deficits, which came about due mainly to decisions made by Ben Bernanke and the Federal Reserve, Standard & Poor's downgraded the United States credit rating from AAA to AA+. Ben Bernanke and the Federal Reserve caused the United States to lose its AAA credit rating.
For more and background see Ben Bernanke and the Federal Reserve are Killing the World Economy
Federal Reserve Preventing Job Growth by Keeping Interest Rates Too Low
Real Questions for the Federal Reserve
Low Interest Rates Cause Low Real Economic Growth
Are We Headed for Deflation?
Published by Joe Dorish
Joe Dorish is a writer who lives in the NYC area. He writes primarily about the things he is passionate about - sports, business, economics, weather and travel. He loves to drive and used to own a Limo company. View profile
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