The Barack Obama economy is too weak to create jobs was the excuse given by Ben Bernanke for launching QE3. The chairman of the Federal Reserve Bank announced on Thursday a third round of quantitative easing, pumping an extra $40 Billion per month into the economy to buy mortgage-backed securities. Also, Bernanke is committed to keeping interest rates low until 2015 at least. While Wall Street hailed the move with gains in the Dow and NASDAQ, the credit rating agency, Egan-Jones has downgraded the United States credit rating from AA to AA- (minus) on Friday. They cited the Fed′s QE3 and said that the plan to purchase mortgage-backed securities will hurt the economy more so than help it.

obama economy

Bernanke′s reasons for doing QE3 are that the economy is still very weak and fragile, and offers no prospects for reducing the high unemployment rate anytime soon. The Fed is forecasting that the unemployment rate will remain above 7.5% for at least another year. With cheap money the only tool the Fed has to use, Bernanke seems to be making a last ditch attempt to help keep Obama in the White House, knowing full well that Mitt Romney has already stated he would not renew Bernanke′s chairmanship when it expires in 2014. So by helping Obama keep his job, Bernanke is trying to help keep his own job.

Many analysts were puzzled by the timing of the Fed′s decision. There is no doubt that QE3 will do nothing to stimulate the economy significantly during the next few months. Any long term monetary policy actions could have easily have waited until after the November elections. Bernanke and Fed apologists will argue that by keeping interest rates low and buying the mortgage securities will enable banks to lend money more easily. That a positive bump in the stock markets may spur more consumer spending and borrowing as well.

But the drawback of QE3 is weaken the U.S. dollar further, leading to higher commodity prices such as oil, gasoline and various grains and food stuffs. Coupled with more tensions in the Middle East, oil has spiked again to the $100 a barrel mark with gasoline approaching $4 a gallon in many states. The summer drought had already caused food prices to rise and now we can expect further increases. So it is unlikely that consumers will have extra money to spend, especially after the latest census data shows that incomes fell another 1.5% this past year under Barack Obama.

So is it any wonder that the Barack Obama economy has been downgraded again by Egan-Jones? That our once Triple-A credit rating is now at Double-A-minus? Ben Bernanke unleashing a third wave of quantitative easing, QE3, is an admission of failure. The Federal Reserve has not truly helped the economy rebound, nor has any of Obama′s policies helped improve the bleak unemployment rate. The message being sent by the credit rating agencies like Egan-Jones is unmistakably clear, four more years of Obama, and Fed Chairman Bernanke, will only drive our economy further off the fiscal cliff.