Bernanke Plan is Punishing The Retirees
Quantitative easing is simply a dilution of the U.S. Dollar. The Federal Reserve Bank will simply buy $600 billion in U.S. Treasuries over the next six months. This creates currency reserves and causes inflation. Therefore, gasoline, oil, copper, sugar, and most every other commodity that generally trades in U.S. Dollars will increase in price.
Most retirees in the United States are living on fixed incomes. Therefore, they have felt the inflation in commodities more than anyone else. Just about everything that a person needs to survive has gone up in price when the purchasing power has declined in price. Over the next three years 76 million baby boomers are scheduled to retire and enjoy the golden years of their lives. Are the baby boomers even going to be able to afford to become new retirees?
At this time the Federal Reserve Bank(central bank of the U.S.) has made it clear that they are trying to create a wealth effect by driving the value of the U.S. Dollar Index lower. There action has certainly helped to get the stock market indexes inflated. The Dow Jones Industrial Average is now trading back above 11,000. However, the price of gasoline has rallied to a new 7 month high and this is certainly a negative. Food products have also soared higher and this is essentially another direct tax on the U.S. consumer and adversely effects the retiree.
What ever happened to simple supply and demand? These days it seems that every country including the United States is trying to devalue their currency in order to boost their exports and economies. Whenever central banks have purposely tried to inflate the stock market artificially in the past it has always resulted in a major bubble. In 2000 it was the tech bubble. Then the Federal Reserve and Alan Greenspan inflated the stock market in 2001 and 2002 which caused the greatest housing and credit bubble in 2008. Now since March 2009 the Federal Reserve lead by Ben Bernanke have been inflating this market higher by using unprecedented measures. We can only wonder what kind of bubble this action will cause?
In any case this action is not good for the current retirees and the 76 million baby boomers that are expected to retire over the next three years. We can only guess when true capitalism will return as there is really no sign of it at this time.
Questions and Answers
Therefore here is an important piece of stock trading advice. Do not chase sudden move stocks. Vital rule to keep in mind. The idea is to buy stocks before movement. Stock prices go up because there are usually large amounts of people buying the stock. A slow, upward trending stock is different than a rapid uptick in cost. Rapid upticks have a tendency to proper very quickly. Or to plummet very fast. Always be suspect of rapid shifts in price.
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