http://online.wsj.com/article/SB10001424052970203946904574300050657897992.html Weak economy? Bernanke says we must give out free money (reserves) and pay interest to the banks on the free money and then ask them to make loans (pretty please). Loans to WHO you ask? The over-leveraged consumer? Real estate/commodity speculators? Non-competitive businesses? Doesn't matter to Bernanke! Strong economy? Bernanke says we must induce the banks to STOP lending money by PAYING THEM a higher amount of interest. Oh yeah, and by giving them bonds in exchange for the free money we gave them initially to be redeemed at some point in the future. --- Keep on rollin', Ben! Fine job sir.
I'm starting to hope that all the pundits are wrong and the FED knows what it is doing. Since not one penny of these trillions the FED has given away are paid for yet, if the FED is wrong...
the fed does know what it is doing. It is trying to keep its member banks alive at any cost. It is is survival mode and it has and will continue to risk the future of the american economy. I keep reading that the banks kept the paper on commercial real estate. I can not fathom how upside down they truly are.
The fed is only taking questionable collateral in a corporate liar loan process that started with the collapse of bear stearns. I discussed this at my blog. Accepting triple A CDO's would have prevented bear stearn's, Lehman's, and AIG's collapse through the Fed's discount window. Far from free, AIG's loans are at rates higher than I pay on my own credit cards, exceeding 15% even. It came too late for Bear Stearns. In fact, nearly 10 minutes too late before the acquisition by JPM was announced. The book is called Street Fighters, and was written for a financially sophisticated audience.
Not when everybody else is printing money faster than the US is. I seriously doubt that. Sure there's a lot of dollars, but not that many new dollars are being printed. London is nearly bankrupt, along with poor economies in the Eurozone where conditions are far worse than the US. Icelands joining to the Euro will serve to cause it to depreciate, making any carry trade unprofitable. The percentage growth of the world's money supply is far greater than the percentage growth in the supply of dollars. Rates will rise eventually.