Wednesday, March 18, 2009

More from the Fed -- How does $1.2 Trillion Sound?

From today's Washington Post, Federal Reserve to Buy $1.2T in Bonds, Mortgage-Backed Securities:
The Federal Reserve said today that it will deploy an additional $1.2 trillion to try to lower interest rates and stimulate the economy, an aggressive move aimed at containing the recession.

The central bank will increase its purchases of mortgage-backed securities by $750 billion, on top of a previously announced $500 billion. It also will double its purchases of debt in Fannie Mae and Freddie Mac to $200 billion. Those steps are intended to lower mortgage rates. The announcement of the previous purchases pushed mortgage rates down a full percentage point.

The Fed also said it will buy $300 billion in long-term Treasury bonds, a step it had previously considered but had been reluctant to act on. That move will lower long-term interest rates for the U.S. government directly and, Fed officials hope, will indirectly lower borrowing costs for businesses and individuals.

Don't say I didn't tell you so. From The Shape of Things to Come, Part 4:
In for a penny, in for a pound. The $800 billion targeted for TARP will clearly not be enough to cover all the "toxic" (i.e., utterly worthless) debts incurred by the bankers and rogue investors deemed "too big to fail." When the financial markets figure that out, the Dow will once more take a nosedive, most likely from 8000 to 7000, or less.

And once again, the fed, or the treasury, or congress will be prevailed upon to save the day by coming up with yet another TARP, even larger than the first. Once again we will be warned of the "dire consequences" that will inevitably ensue if yet another bailout isn't engineered -- as soon as possible, natch.
I'll admit I'm not the only one to have seen this, not by a long shot. Economists all over the Internet have been screaming bloody murder about this intolerable situation for months.

This can't go on. But it will anyhow. Because it "has to." Because "there is no other choice."

But of course there are other choices, just not anything considered politically acceptable to Americans conditioned for so long by the policies and rhetoric that have brought us to this point. But the political climate is changing. Rapidly. Let's hope it changes soon enough to bring us back to our senses. People are more important than economics. Homes are more important than mortgages. Resources are more important than money.

To quote a sly old fox: When money becomes God, we will discover that, like God, we can do without it.

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