Federal Reserve to Buy Additional $600 Billion of Securities to Aid Growth

[harvey007]

Source: Bloomberg

The Federal Reserve will buy an additional $600 billion of Treasuries through June, expanding record stimulus and risking its credibility in a bid to reduce unemployment and avert deflation.

Policy makers, who said new purchases will be about $75 billion a month, “will adjust the program as needed to best foster maximum employment and price stability,” the Fed’s Open Market Committee said in a statement in Washington. The central bank kept its pledge to keep interest rates low for an “extended period.”

Read more: http://www.bloomberg.com/news/2010-11-03/federal-reserve-to-buy-additional-600-billion-of-securities-to-aid-growth.html

[rfranklin]

1. More free money for the banksters....

It's not doing anything for the average Joe.

[spinbaby]

2. Translation

They're going to print 600 billion in new money and give it to the banks, who will sit on it.

[tomm2thumbs]

5. they'll sit on it OR invest it for quick profits in the market, ignoring lending for business

casino is open - here are your comps!

[joshcryer]

9. It is interest bearing at least.

If they just printed it magically it wouldn't have any value.

[nyy1998]

3. I find it funny that they announced it now

But this is good news...

[Greyhound]

4. Another sizable chuck of the stolen money cleaned with the debt dumped on us.

By monetizing these losses, they get to keep all the money they stole and all the 'profits' it generates.

We are literally paying them for robbing us.

[JDPriestly]

6. This is inflationary.

Why not just invest. I guess Geithner and Bernanke were waiting for the election outcome to make this announcement. It is a way to circumvent the Republican Congress.

But it is not the best solution. A weightier stimulus bill should have been passed way back two years ago. A lot of problems could have been averted.

Too late.

This is going to hurt us seniors really, really seriously.

If you are 75 and thought you might be able to to supplement your Social Security with the small amount of savings you accumulated over your working life -- there goes your nest-egg. If Wall Street and the likes of people such as Bernie Madoff didn't steal you blind in 2008, here goes whatever small amount is left.

The worst of it is that watering the currency without measures to make sure the money is spent in our domestic economy could and probably will make a bad situation much, much worse.

Bernanke, you will answer to your Maker for this. You may be fooling the American people, but, assuming there is a God, this is one you will account for one day . . . .

If spurring exports of American goods is the point, why don't you just advocate for modifying trade agreements? That would be much wiser than simply watering the dollars.

[spinbaby]

7. They haven't finished looting the boomers yet

Some of them still have some retirement savings.

[askeptic]

44. Yep - steals our retirement savings

Continuously inflating the money steals the retirement of millions who have tried to save their entire life for retirement. While stagnant or declining wages make it ever harder to save. No one in government has the kahunas to resolve the fraud in the banking system, so they just keep papering it over by stealing everyone else's money. Since my wife has dual citizenship, we're continuing to move our money into Canada. Too bad this isn't really an option for people who are expected to take care of themselves in the future with a dollar that continues to decline in value...

[unblock]

10. they didn't exactly "wait until the election"

first, this was at one of the fed's 8 regularly scheduled meetings each year, it was on the calendar a year ago. i'm sure they did decide back then to schedule it for right after the election rather than right before, but that would have been a routine practice.

second, they very much telegraphed their intent to do exactly this over the last few weeks, in speeches fed members gave at conferences or to the press. the fed does not like surprising the markets. the only detail that was uncertain was the exact dollar amount, but even that was understood to be in a comparatively narrow range.


and yes, this is inflationary. that's a good chunk of the point. while a lot of inflation is obviously a bad thing, a complete lack of inflation is also a bad thing. just a little bit of inflation encourages money to by put into productive purposes, rather than being stashed away. that's part of what the fed is trying to do.

[JDPriestly]

12. They could have done this months ago.

Yes, they telegraphed this months ago, but the average American avoids anything to do with math -- including economic news.

[unblock]

17. go back more than a few months and it wasn't clear qe2 was needed.

then when it was clear that it was needed, there was not only the concern that the markets would get rattled by a surprise move, but also the concern that doing something like this shortly before an election would be politically motivated.

note also that the market can get quite rattled when the fed makes moves between sessions.


i'm not going to particularly criticize the fed on this one, the HUGE failure is on the part of the senate republicans for preventing more meaningful fiscal action.

[JDPriestly]

29. Well, you have a good point about the Republicans' failure to act

as needed.

This money watering is, however, really a bad alternative to a strong job stimulus bill. Really bad. The money is just as likely to make things worse as to make things better.

This is very scary. Well, I should say even scarier.

[unblock]

47. well, i'll certainly agree that fiscal action would be far preferable

the fed has the advantage of being able to take action when fiscal policy is lost in gridlock.
the fed has the disadvantage of having, by and large, only a single lever with which to try to control the economy.

fiscal policy could be far more effective and targeted, but we have a gorvernmental structure where fiscal policy is made like sausage.


the money stimulus right now is a good (but not great) thing.

whether or not it ultimately causes problems really depends on when they unwind these transactions. if they keep goosing the money supply too much, too long, then eventually, we'll have yet another bubble and be right back in a familiar boom/bust cycle.

[GeorgeGist]

28. Hook, line and sinker ...

[unblock]

32. it's fun to learn how financially naive i am after working in this industry for decades.

never mind all the college and grad school courses i took in econ and finance.

[On the Road]

25. An Inflationary Policy Might be the Best of Several Bad Options Now

as long as it succeeds in its goal of stimulating the economy. It also has the virtue of reducing the real value of the national debt over time.

It also might not be as inflationary as it looks. When velocity sinks during a recession, the money supply needs to expand as a counterbalance. The old-school approach of reducing the money supply just makes recessions worse.

As a practical matter, a big spending bill did not have sufficient support before the elections. Now it's completely out of the question.

[B2G]

45. Spot on.

Commodities are going to go through the roof. Strap yourselves in.

[Roland99]

8. A race to the bottom. Which country can devalue its currency the furthest?

[unblock]

11. and this is a bad thing?

i think our currency has been overvalued for a long time and this is at the heart of much of our problems. a strong dollar is "nice" because it lets us afford imports, but it also makes our exports more expensive, and over a long period of time, that hurts industry here, workers here, and ultimately wealth here. a lower dollar over the last decade or two would have made offshoring economically unworkable.

now, if the dollar weakens enough, it becomes more economically viable to create stuff here and export it, and to buy domestically.

[Roland99]

14. FYI, most of our purchases are imports. Never heard of the Trade Deficit?

Not to mention oil will continue to go up as the dollar tanks making everything more expensive in return.

And, it's a matter of time before faith is lost in the dollar as a reserve currency and it starts getting dumped and/or bonds aren't bought anymore.

[Romulox]

15. It's not the Federal Gov't's job to artificially inflate currency so that you can buy more imports.

Jeesh. :eyes:

[Roland99]

16. where did I ever say it was? "Chopper" Ben is dragging the dollar down into the crapper

It's only going to hurt the middle and lower classes as our dollars are worth less and less each day.

It might help some U.S.-based global corporations that use offshored production at slave labor wages in third world countries and then sell their goods overseas, where the profits are also moved in order to avoid paying taxes here in the U.S.

So, tell me how dragging the dollar into the crapper is a GOOD thing.

[unblock]

18. a weaker dollar makes offshoring less profitable, and domestic hiring less expensive.

yes, it makes imports more expensive, and not only rich people buy imports, point taken.

but settling in at a lower level for the dollar, instead of relentlessly insisting on being the dominant world currency, is ultimately much better for job-seekers.

a too-strong dollar for too long is largely what got us into this mess -- a terrible situation for the poor and middle class.

[Roland99]

19. No, lack of regulation, unenforced regulation and too-low interest rates got us into this.

[unblock]

20. there are messes on top of messes. much of the deregulation is actually good for number of jobs

of course, i'm a huge fan of a higher minimum wage and environmental protections and consumer protections and so on, but having those and enforcing those aggressively makes hiring domestically less desireable. so much of the DE-regulation helped the employment picture here (at the expense of creating other problems, of course). strong regulation works best for americans when businesses can't easily offshore (i also support a tax on businesses that ship jobs overseas for this reason.)

the too-low interest rates created various financial bubbles, which caused obvious problems, but in terms of employment, it meant businesses hired "too many" people (more than they would have had there been no bubbles), and the crash and ensuing layoffs were merely a return to "correct" levels. these "correct" levels are atrocious not because of the bubble and crash, but because the dollar remains far too strong, and has been so for so long that our manufacturing sector has been gutted.

[Roland99]

23. You're joking, right? "too many" people were hired during the Bush years?

wow.

[unblock]

24. clinton years, actually. that was during greenie's low-interest rate bubble.

the more recent real-estate bubble was just one financial bubble in a series.

greenspan, along with republicans' relentless drive to concentrate wealth in the hands of the few, created the environment for financial and economic bubbles.

of course shrub was a disaster in many ways.

[Romulox]

27. Some of us have seen nothing but American decline in our lifetimes

Tell us again what our stake in preserving the financial status quo at all cost? The same status quo that has delivered 30 years of stagnant wages to workers...

"So, tell me how dragging the dollar into the crapper is a GOOD thing."

It's been adequately explained to you several times now. Cheap imports = domestic unemployment and concentration of wealth at the top.

[amandabeech]

46. The problem is that we import from countries who peg their currencies the dollar,

to the the Chinese yuan, which pegs its currency to the dollar.

If we devalue our currency, what is going to make China float its currency?

What is to make the Vietnamese, for example, stop pegging to the Chinese or us?

The Chinese and many other countries play by their own rules, not ours, and not the rules that free market theories require.

I just don'g get it.

[unblock]

48. you're right, that's a great complication. they have protectionist policies, and we don't fight back

refusing to allow your currency to strengthen is a great way to protect jobs and industry locally.
when your economy is booming like china's is, while ours is suffering, that's not at all what the "free markets" are supposed to do, and it causes global economic dislocations.

but our political process is too beholding to rich people and corporations who benefit greatly from their trade with china, so it's very hard to get a proper result here.

[Romulox]

13. Odd to wait until the day after an election to announce another round of bailouts for the banksters

I guess that's how a quid pro quo works, eh, Mr. President?

[unblock]

22. i'm not sure bernanke (shrub appointee) listens to obama much.

he's a fed board member through 2020 i think -- he'll long outlast obama.

yes, obama re-upped him as fed chair, but bernanke's best bet for another re-up in obama's second term is if he does right by the economy. directly working with the president is not typically high on a fed chair's list.

[Romulox]

26. Actually, Ben Bernanke is an OBAMA appointee

http://www.google.com/hostednews/afp/article/ALeqM5jpV1DUUSwWw5PXFRXoFv3DwFn56Q

"Yes, obama re-upped him as fed chair, but bernanke's best bet for another re-up in obama's second term is if he does right by the economy. "

You've contradicted yourself several times in one post. :wtf: Bernanke is Obama's man. :hi:

[unblock]

31. shrub appointed him in 2006 to a 14-year term on the federal reserve board

and bush also appointed him at the same time as fed chair.

all obama did was re-appoint him in 2010 as fed chair. he's on the board regardless as a shrub appointee.

bernanke is not obama's man, he's shrub's man. obama decided that he didn't want to rock the boat at that point, but i HIGHLY doubt that obama would have appointed bernanke had the fed chair position simply been vacant, say, if greenie hadn't retired until 2010.

that doesn't make him obama's man, merely not odious enough to pick someone else during a crisis when a change in that role would really have been risking his presidency on an untested appointee in a critical role over which the president doesn't have firing power. bernanke is a republican, remember.

http://www.federalreserve.gov/aboutthefed/bios/board/bernanke.htm

[SnakeEyes]

21. And the dollar is devalued further

[bemildred]

30. That won't do shit for "growth". nt

[Ter]

33. Hopefully, the new Congress will abolish it

n/t

[howaboutme]

43. Yeah right - they say it is about good overcoming evil, or vice versa

JFK mentioned weakening the power of the Fed and we know what happened there.

http://en.wikipedia.org/wiki/John_F._Kennedy_assassination_conspiracy_theories

[UpInArms]

34. Fed to buy $600 billion in bonds in effort to boost economic recovery

Source: Washington Post

The Federal Reserve escalated its efforts to get the U.S. economic recovery back on track Wednesday, again entering the realm of risky and untested policy in response to the worst downturn in generations.

The plan to pump $600 billion into the financial system is designed to stimulate the economy in large part by lowering mortgage and other interest rates.

Although the approach carries significant risks for both the economy and the central bank's credibility, the steps announced by Fed policymakers could represent the nation's best hope for breaking free of sluggish growth, especially with bold initiatives unlikely from a newly divided Congress.

Fed officials concluded that growth is too slow to bring down the 9.6 percent unemployment rate and is at risk of staying that way for some time absent new action. They were also concerned that inflation has been running too low and were looking for a way to encourage modest price increases, which would give consumers and businesses more reason to spend money before its value declined and help energize the economy.

"The pace of recovery in output and employment continues to be slow," the Fed's policymaking panel, the Federal Open Market Committee, said in a statement. "Employers remain reluctant to add to payrolls. Housing starts continue to be depressed."

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110305412.html

[RandomThoughts]

35. LOL that comment is to tell people that the blackmail of economic suppression

Is being done by the Federal Reserve.

[UpInArms]

36. "money out of thin air" - gotta add this part

The Fed usually manages the economy by adjusting short-term interest rates. With those rates already near zero, Fed officials had to dust off a strategy for boosting the economy that debuted during the darkest days of the financial crisis. The Fed plans to create money, essentially out of thin air, and then pump it into the economy by buying Treasury bonds on the open market. These purchases are to be finished by the end of June, the Fed said.

Using this technique, called "quantitative easing," the Fed bought more than $1.7 trillion in securities during the financial crisis and in its immediate aftermath. The central bank's holdings jumped to their current level of $2.3 trillion, and the figure will approach $3 trillion when the new purchases are complete. This new wave of bond buying is a dramatic turnabout for an institution that just six months ago, amid a false spring in the economy, was weighing how it would begin unloading all the securities it had purchased.

[howaboutme]

39. The Federal Reserve has always been focused on enriching the bankers

The policy of quantitative easing is about forcing low interest rates upon Americans and encouraging more debt, less savings and to push up the Wall Street stock market. QE forces Americans to buy stock instead of CDs or safe investments. They even eliminated the attractiveness of savings bonds and financing of American debt by Americans. They want the dollars earned by Americans to be used to buy and consume and increased indebtedness instead of saving.

As I recollect "End the Fed" was actually one of the initial core philosophies of the Tea Party movement and one with which I agree wholeheartedly, but it was hijacked when the media and Wall St Fed worshipers portrayed them all as tin foil racists. A big mistake by Democratic leadership was attempting to tear down the Tea Party instead of attempting to mold it with Democratic specific philosophies such as at Tea Party rallies with signs such as "Prosecuting Wall Street Instead of Rewarding Them" , and "Give People Control of Government Instead of Corporations and Bankers". There was a huge opportunity to change the dynamics of the Tea Party away from extremely right wing and instead to the anti-plutocracy philosophy of the original Tea Party. I'm convinced that the elite preferred to have the Tea Party vilified, than having it molded into an anti-plutocracy movement.

[Skink]

37. Didn't that prevent total collapse of the financial sector.

that's probably where we are again.

[thunder rising]

38. $600 billion...and they still won't loan money. The banksters will be huge bonuses though.

[kirby]

40. Absurd...

How much cheaper should interest rates be? When borrowing 'other peoples' money is so cheap, it is easy for people/businesses/investors to take massive risks.

[TheWatcher]

41. This Will End Well.

:eyes:

[ipaint]

42. "Heads You Lose, Tails You Die".

Hold out your hand for billions, and you will be in high regard and your needs satisfied; hold it out for food, and you will be spat upon and kicked down the road.

Everyone's asking if and how the markets will respond to one set of bad actors being replaced by another one, or "the biggest announcement by the Fed in decades" when Bernanke on Wednesday will reveal how many trillions he doesn't own but still has spending power over, will be passed on to a banking, gambling and mortgage lending cabal that's so far in the red it should have been thrown overboard ages ago.

All this while WaMu is losing over 60% of its market value in one day today. Bad for JPMorgan, its new parent since 2008? You'd think so, but really, why should it be as long as Jamie Dimon can suckle at your painful breast anytime he feels like doing so? If you still don't get the name of this game, I’ll say it once again:

"Heads You Lose, Tails You Die".

http://theautomaticearth.blogspot.com/


Depression here we come.