Is it just me, or is printing hundreds more billion dollars and giving it to bankers

[leftofthedial]

the WORST possible "solution" to the current problem?


Won't this just trigger yet more inflation? (Not to mention that it will just let the same incompetent and corrupt repuke-connected assholes keep afloat long enough to steal more money.)

[BrklynLiberal]

1. It certainly sounds like a strange way to deal with the situation.

[Vanje]

2. Yeah.

We aint seen nothing yet.

[nadinbrzezinski]

3. Depends how you do it

but realize Bernacke is doing all that was not done in 1929

Before he took over, that is what he taught.. and his specialty

[cascadiance]

13. Yup. There's speculation the CIA is already minting dollars and blaming counterfeits on N. Korea...

http://www.nowpublic.com/german_paper_reports_cia_counterfeiting_us_currency

Probably needed to do it for all of the black ops operations we are running and not make it look like "official" money, and avoid the Iran Contra problems earlier.

McClatchey has also reported on this issue...

[leftofthedial]

18. I'm waiting for the hundred-thousand-dollar loaves of bread . . .

then we'll be ready for our own little hitler

[lonestarnot]

4. Well since we don't know how much, no M3, who cares. Snort.

I mean what we don't know can't hurt us right? :sarcasm:

[dixiegrrrrl]

5. it is a damned if they do, damned if they don't problem now

as long as they try to deal with symptoms and not the primary problem, they cannot effectively treat the disease. So loosening or tightening the money supply does not matter either way.
Their goal is stave off the inevitable until Jan.

[Truth2Tell]

6. It's just you.

Everyone else thinks the Fed is brilliant. What's wrong with you? Clearly you need more television. And some prescription products. Get with the program citizen!

[avaistheone1]

15. Yup the economy sucks, but you have a funny spin on it..

:bounce:

[WindRiverMan]

7. It worked wonderfully for Germany after WWI

oh yeah ,never mind.

[An Intellectual]

8. This was the SINGLE issue about which the radical racist Ron Paul was right.

[tuckessee]

9. It's a sugar coated band aid on a sucking chest wound. n/t

[LoKnLoD]

10. If we

If we haven't wasted $550,000,000,000 on Iraq http://www.nationalpriorities.org/costofwar_home , it would have been paid for. Not that Iraq has been paid for either.

[Greyhound]

17. Chump change, we spend that much on the rest of the military every year. n/t

[KT2000]

11. they are treading water till

the election. The next president will have a huge mess.

[On the Road]

12. They're Not Handing Out Money to be Banks

They're providing liquidity. The money will return to the Treasury minus any amounts from failed banks unable to repay their debt.

[DaveT]

14. Could you please explain

the difference between "providing liquidity" and "handing out money"?

And whence cometh this "liquidity"? The Federal Government collects far less in taxes than it spends. I understand that the Federal Reserve Bank is actually a bank and not the Federal Treasury -- but where does the Fed get its own "liquidity"?

Not just being snarky here -- I am confused about where the Fed gets the money to dole out.

The larger problem for the USA is that we spend now around a couple of billion dollars a day more than we produce. It has been several decades since we produced enough to satisfy our own appetites. Even so, somehow, somebody is always available to "provide liquidity" to goverments, business entities and consumers.

The current crisis is based on the inability of a lot of institutions and people to "repay their debt."

I hear this metapor about "breathing room" -- shoring up the "liquidity" crisis of this or that bank with more debt. OK, so with this breathing room provided, what is going to change the fundamental problem of the whole society living on a pyramid of debt?

[HamdenRice]

21. In a way, the answer is embedded in your question

You wrote:

"I am confused about where the Fed gets the money to dole out.

The larger problem for the USA is that we spend now around a couple of billion dollars a day more than we produce..."

That is correct. But that means that billions of dollars are floating overseas in China, Saudi Arabia, Japan -- in their central and commercial banks. The holders of those dollars need somewhere to put that money where it will earn interest, and because they are dollars, they need dollar denominated investments.

Before this crisis, the "best," safest place, with the best balance on return and low risk was mortgage backed securities. Now those holders are desperately looking for some other safe place.

As a result, there is a desperate demand for US treasury bills. Holders of dollars are so desperate for t-bills that they have driven the price up, which means the interest rate has gone down to the lowest since 1941 for the federal government to borrow.

So all the Treasury has to do is sell T-bills which brings those billions of dollars home in exchange for IOUs from the US government. That cash is then used to provide liquidity to banks. The fed lends that money to the troubled US banks, accepting the banks own mortgage backed securities as collateral.

[On the Road]

23. The NYT Put it This Way

Reflecting concerns about the health of the global financial system, the Federal Reserve and the world’s other major central banks significantly escalated their assistance to global markets on Thursday, making almost $200 billion available after bank lending came to a near halt and threatened the global economy.

In a statement released at 3 a.m. in Washington, just as the markets opened in Europe, the Fed said that it had authorized a $180 billion expansion of its temporary reciprocal currency arrangements, known as swap lines, to allow banks to borrow more dollars in money markets at a lower rates.

http://www.nytimes.com/2008/09/19/business/worldbusiness/19centbank.html?em

Public and private banks constantly borrow short-term money from each other. The amounts available became insufficient this week.

The money is fiat money -- no bills are being printed. The Fed is simply allowing other banks to record that they are borrowing a certain amount.

The theory behind this is that it may allow other banks enough breathing room to survive the short term crunch and prevent unecessary failures. It would be like if you needed a payday loan in order to keep your job.

[Greyhound]

16. As always, given five options to address a problem, they will invariably pick

the worst possible one that guarantees no resolution and usually exacerbates it.

[Prophet 451]

19. Not quite the worst but close

It would have been simpler to just outright nationalise the failing banks.

[leftofthedial]

20. I don't see how they can possibly keep this "free market" turd floating

[moondust]

22. Gotta be a scam.

They're pulling this off before Bushco leaves to make sure they get away with it.