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.
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