FED initiates new 600B round of quantitative easing

[30ashopper]

Even absent such risks, low and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating. The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed. With short-term interest rates already about as low as they can go, the FOMC agreed to deliver that support by purchasing additional longer-term securities, as it did in 2008 and 2009. The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August.

It's the only arrow they have left in the quiver, and it's kind of a dull one at that.

Ben S. Bernanke - What the Fed did and why: supporting the recovery and sustaining price stability

Many outside the Fed, and some inside, see the move as a 'Hail Mary' pass by Fed Chairman Ben Bernanke. He embraced highly unconventional policies during the financial crisis to ward off a financial-system collapse. But a year and a half later, he confronts an economy hobbled by high unemployment, a gridlocked political system and the threat of a Japan-like period of deflation, or a debilitating fall in consumer prices.

Fed to Buy $600 Billion of Treasurys - WSJ.com

 

[LuciferSam]

So if we get this deflation will gold really be such a great asset?

 

[Andy A]

So if we get this deflation will gold really be such a great asset?

30ashopper, Buz or some of you other financial wizards correct me if I am wrong but my understanding is that the printing of money to buy back our debt will create inflation, not deflation. It seems a foolish plan to me and all it will do is devaluate what little I have managed to save over the years. Another area that needs to be addressed. A FED with absolutely no oversight by anyone.

 

[30ashopper]

30ashopper, Buz or some of you other financial wizards correct me if I am wrong but my understanding is that the printing of money to buy back our debt will create inflation, not deflation. It seems a foolish plan to me and all it will do is devaluate what little I have managed to save over the years. Another area that needs to be addressed. A FED with absolutely no oversight by anyone.

Yes it will in theory, and that's exactly what the FED wants. They feel the current inflation rate is too low. By raising the inflation rate, they push cash sitting on the side lines out into riskier investments like stocks, real estate, etc..

 

[LuciferSam]

30ashopper, Buz or some of you other financial wizards correct me if I am wrong but my understanding is that the printing of money to buy back our debt will create inflation, not deflation. It seems a foolish plan to me and all it will do is devaluate what little I have managed to save over the years. Another area that needs to be addressed. A FED with absolutely no oversight by anyone.

The federal reserve is a series of independent banks that are not part of the government. I don't know why a staunch Republican would expect any kind of oversight.

 

[Andy A]

The federal reserve is a series of independent banks that are not part of the government. I don't know why a staunch Republican would expect any kind of oversight.

I am well aware of what the FED is. There commission, board or whatever you want call it, with Bernake as head, makes decisions, and has for years, that affect every citizen. Whether Republican or Democrat it does so without oversight, which in my opinion, is needed.

 

[LuciferSam]

I am well aware of what the FED is. There commission, board or whatever you want call it, with Bernake as head, makes decisions, and has for years, that affect every citizen. Whether Republican or Democrat it does so without oversight, which in my opinion, is needed.

So you think government oversight of private organizations is necessary? Looks like your inner socialist is coming out.

 

[30ashopper]

I am well aware of what the FED is. There commission, board or whatever you want call it, with Bernake as head, makes decisions, and has for years, that affect every citizen. Whether Republican or Democrat it does so without oversight, which in my opinion, is needed.

Look on the bright side, the FED isn't perfect, not by a long shot. A lot of our problems today can be traced back in part to past FED action. But I shudder to think what kind of damage the central bank could do if it were controlled by the politicians in Washington.

I think Bernanke is doing the right thing. With the politican head winds shifted, confidence in the economy has a chance to take root. Assuming the FED is successful a slight increase in inflation will help too. (Although they've had lackluster succcess thus far, so I wouldn't get my hopes up just yet.)

 

[Andy A]

Look on the bright side, the FED isn't perfect, not by a long shot. A lot of our problems today can be traced back in part to past FED action. But I shudder to think what kind of damage the central bank could do if it were controlled by the politicians in Washington.

I think Bernanke is doing the right thing. With the politican head winds shifted, confidence in the economy has a chance to take root. Assuming the FED is successful a slight increase in inflation will help too. (Although they've had lackluster succcess thus far, so I wouldn't get my hopes up just yet.)

I'll acquiesce to your superior financial acumen and knowledge. LS, who doesn't seem to understand you can be for oversight without being socialist, not so much.

 

[futurebeachbum]

Pretty thorough explanation

At least Wall St (Goldman Sachs) earns a commission on the Feds bond purchase...That's covered at 3:45 in the video.

We couldn't have the Fed buy the bonds directly from the Treasury.