The end of cheap and easy money

On May 22, this year, Chairman Ben S. Bernanke of the US Federal Reserve Board triggered what looks like a meltdown in stock markets around the world, including the Philippines (where stocks declined by 17 percent from their May 15,2013 high), and the depreciation of the peso by 5.6 percent, from P41 to more than P43.32 per dollar.

Bernanke testified before the US Congress Joint Committee on the US economic outlook. His testimony is a classic in obfuscation and gobbledygook. He sounded neither here nor there, neither pro or con, neither in and out, of Quantitative Easing, the program whereby the equivalent of America’s central bank buys up to $85 billion a month of IOUs of the Federal government (the so-called long-term Treasury securities) and private companies (the so-called agency mortgage-backed securities) at almost no cost to the latter. It’s the equivalent of printing money, without any counterpart in production of goods and services.