NY Times: "Quantitative Easing" New Massive Infusions to avert depression:

[amborin]

"The Federal Reserve and the Treasury announced $800 billion in new lending programs on Tuesday, sending a message that they would print as much money as needed to revive the nation’s crippled banking system.

The gargantuan efforts — one to finance loans for consumers, and a bigger one to push down home mortgage rates — were the latest but probably not the last of the federal government’s initiatives to absorb the shocks that began with losses on subprime mortgages and have spread to every corner of the economy.

<snip>

In the last year, the government has assumed about $7.8 trillion in direct and indirect financial obligations. That is equal to about half the size of the nation’s entire economy and far eclipses the $700 billion that Congress authorized for the Treasury’s financial rescue plan.

<snip>

But analysts said the program would do little to reduce the tidal wave of foreclosures. That is because most of the foreclosures are on subprime mortgages and other high-risk loans that were not bought or guaranteed by government-sponsored finance companies like Fannie Mae.

Stock investors reacted coolly to the announcements. The major stock indexes initially fell. The Standard & Poor’s 500-stock index later edged up, closing at 857.39, up 0.66 percent. The Nasdaq closed down 0.5 percent, at 1,464.73.

The long-term risks are enormous but difficult to estimate. They begin with the danger of a new surge of inflation, at least after the economy comes out of its current downturn. Beyond that, taxpayers will have to pick up the losses from loans that default or guarantees that have to be made good.

<snip>

Administration and central bank officials contend that the risk of doing nothing is a full-blown depression in which unemployment climbs above 10 percent and the country needs years to recover. Many private economists agree.

“They are doing whatever it takes,” said Laurence H. Meyer, a former Fed governor who is now vice chairman of Macroeconomic Advisers, an economic forecasting firm. “The problem is, the more you go in this direction, the harder it is to turn around and the harder your exit strategy is.”

Most economists agree that the United States is in the worst financial crisis since the Great Depression, and that it has already fallen into a severe recession that is likely to be one of the deepest in decades.

“What they are doing is trying to limit the damage to something consistent with a severe postwar recession, but not something worse than that,” Mr. Meyer said.

Indeed, the government reported on Tuesday that the economy contracted by 0.5 percent in the third quarter, slightly worse than previously estimated. But private forecasters predict that economic activity will fall by 4 to 5 percent in the fourth quarter and continue to contract for much of next year.

In the first of two new actions announced on Tuesday, the Treasury and the Fed said they would create a $200 billion program to lend money against securities backed by car loans, student loans, credit card debt and even small-business loans.

The Treasury would contribute $20 billion to the so-called Term Asset-Backed Securities Loan Facility and assume responsibility for any losses up to $20 billion. The Federal Reserve would lend the new entity as much as $180 billion.

The new facility would then lend money at low rates to companies that post collateral based on securities backed by consumer debt or business loans. The new program would be allowed to accept only securities with Triple-A ratings, the highest possible, from at least two rating agencies.


<snip>

Unemployment, at 6.5 percent in October, is still likely to climb to 7.5 or even 8 percent next year, he predicted. But it may not shoot up to 9 or 10 percent, a level that economists often consider the unofficial dividing line between a recession and a depression.

<snip>

The move amounts to what economists refer to as “quantitative easing,” which means having the Fed pump staggering amounts of money into the economy by buying up a wide range of debt instruments.

Fed officials have made it clear they are prepared to print as much money as needed to jump-start lending, consumer spending, home buying and investment.


<http://www.nytimes.com/2008/11/26/business/economy/26fed.html?_r=1&ref=todayspaper&oref=slogin>

[amborin]

1. is this really what we need? yet more out of control consumerism?

consuming more and more commodities, often just for the sake of status, or just to go to the mall and spend?

doesn't the world needs leadership that says: enough rampant consumerism; that's destroying biodiversity and fueling global climate change; we need to change our core values, place more value on sitting and reading a book, not going out and purchasing some new toys

the leading capitalist nations, especially the U.S.,have to be the first to set an example to the rest of the world; when India and China fully come on line, just in terms of cars, biodiversity is doomed;

but the problem is: exercising that kind of leadership won't fly in our political culture; it would be labeled communist, or socialist, or worse;

so....

[Median Democrat]

Small Anecdote - I Do Some Work On Government Budgets

Things are looking pretty bad. Obama sounds calm, but this obscures the fact that this economy could easily go into the shitter even worse than it has. 2009 could make 2008 look the good ol' days as the full impact of the credit crisis, and drop in sales reveberates through the economy.

[Median Democrat]

2. Small Anecdote - I Do Some Work On Government Budgets

Things are looking pretty bad. Obama sounds calm, but this obscures the fact that this economy could easily go into the shitter even worse than it has. 2009 could make 2008 look the good ol' days as the full impact of the credit crisis, and drop in sales reveberates through the economy.