Eighty five billion a month will seem tiny compared to the avalanche of the $1.863 trillion excess reserves exploding rapidly into the economy. That would devalue the currency, cause more rapid inflation and worry investors about a coming collapse.
Fed Chairman Bernanke seems to have abruptly switched sides in the stimulus debate. He said the purchases of bonds and mortgage securities could begin to be 'tapered' by the end of the year, if unemployment continues to fall. So why is Bernanke suddenly so optimistic about growth?
Since the 1970s, Republican economic policies have prevailed that diverted most of the fruits of prosperity to the wealthiest, so that the rest of U.S. have less to spend -- even though consumer spending drives 70 percent of economic activity.
The Fed bought securities that pay interest. After deducting its expenses the Fed sends the remainder to the Treasury to reduce the deficit. This intergovernmental transfer is an accounting gimmick and has no economic effect.
What is holding up agreement of a debt ceiling increase is obvious. Republicans want to continue to shrink the middle class when they won't allow repeal of the Bush tax breaks. They do not understand the most basic economic Law of Supply and Demand.