Former Treasury Secretary John Snow explains the short strokes of QE last night on PBS Nightly News. He makes no bones about explaining the government's objective in printing more money (adding to tax payer debt) in order to buy paper assets in the open market. To wit:
“…you buy government paper that’s held by financial institutions or individuals. And then they have the money. And then they go out and buy some other financial assets, stocks. And they drive up the value of those other financial assets so we get an increase in the value of financial assets which means an increase in the value of lots of peoples’ household wealth. And the idea is if household wealth goes up, then that will be a spur to spending.”
So you artificially prop up asset prices above market values in the hopes that people will not sell their assets at these elevated levels and bank the profits, but rather you hope that they will continue to hold their units in the ponzi scheme, “don't worry be happy”, and find a way to keep spending no matter how bad the economy looks. Wow, this is the best plan of the most educated and informed financial minds in the government? Who wants in?
Hat tip: Tim Iacono.