The Fed Must Be Crazy

March 18, 2009 at 10:58 am  ·  Category: Federal Reserve, Market Commentary

To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion.  Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.  The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.

FOMC Statement, March 18, 2009

The Fed really shocked everybody today with it’s aggressive actions.  They are essentially going to print even more money to buy another $750 bil in agency mortgage backed securities, $100 bil in agency debt and $300 billion of Treasuries.  In other words, they just announced another $1.15 trillion in purchases!

This is pure inflationism and the reaction in markets has been dramatic: the dollar is getting crushed, gold is surging, treasuries are getting a huge lift, and the stock market is surging. 

Basically, they are diluting the dollar to inflate asset markets to prop up our bubble based economy.


On this, also check out my:

“Fed Goes For Shock and Awe”, Top Gun FP, December 16, 2008

“The Next Bubble”, Top Gun FP, October 29, 2008

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No Responses to “The Fed Must Be Crazy”
  • When the tide turned, it turned out that too many talented and brightest of our glorious scAmerican economy have been swimming and xxxxing naked.

    So Comrade Ben pumps water from the filthy reserve lake to hide them from prying eyes.
    Let turn on the music and dance again, …

    How likely is that, when Ben is the only guy who want to dance ?

    unsecured security  ·  Mar 19, 2009 at 2:04 pm  ·  Permalink
  • Itsw still not clearclear if inflation is on the way for the USA and probably Canada as well or if a big depression is on the way.
    But what is a person to do with his assets. If he keeps them they will be worth a lot more even if when you later sell you will not be able to buy any more goods then before, because all the prices went up.
    How ever if you took out a large mortgage inflation would make it easier to pay it off. You copuld then sell and because the price went up you would pay off the mortgage which would now appear small.
    If the stimulation package does not work and prices go down a person should sell now and then buy twice as much later

    Jake Loepp  ·  Mar 24, 2009 at 7:16 pm  ·  Permalink
  • You don’t do anyone a servce with this hyperbole.
    The dollar DIDN’T get “crushed”, and gold ISN’T “surging”.

    I’m not a fan of the Fed or this administration, however you shouting the sky in falling when it isn’t…well, that just plays into their hand.

    Don  ·  Mar 26, 2009 at 8:29 pm  ·  Permalink
  • The dollar absolutely did get crushed: the Euro moved up 5 cents against it that very afternoon. And gold surged: up $70 or so in the wake of the Fed announcement. The moves were dramatic and pronounced. Treasuries had their biggest move since the wake of the October ’87 crash. Those are big moves.

    Greg Feirman  ·  Mar 27, 2009 at 11:38 am  ·  Permalink

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