Yves smith highlights how QE2 will do nothing for the economy but goose the banks

Yves Smith of Naked Capitalism fame explains the dubious effects of Quantitative Easing on the economy.  For QE2, the Fed will not go to the Treasury where they will get them at Par.  They will go to the banks, primarily Goldman Sachs, where they will be able to work the Fed for a great price in a less than competitive marketplace.  As with ultra-low  interest rates, this kind of stimulus is not a stimulus for main street, but instead wall street.  The Fed, and others, are worried about the solvency of our banks and thus they think that if they keep giving money to the banks they will stick around and keep lending and avoid catastrophe. 

We must assume that the brainiacs at the Fed are smart, so I guess I have to put them in my sinister column. 

She talks about the resumption of the carry trade, but this time with the US as the patsy.  Investors are already starting to do a reverse carry trade where they borrow in the US at our wickedly crazy low interest rates.  Then, they will take the money and invest in Brazil or China.  It worked for more than a decade in Japan, why not here? 


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