The Fed just printed $7,400,000,000,000.00

Quick,

Pay off our debt before the value goes down.

DD

 

I think those are borrowed money, not printed.

 

No matter what, the feds are completely out of control. Putting everything on a credit card with no means to pay it off got us in this mess.....and look at the answer. Imbecilic.

 

Did you write a memo to the Secretary of the Treasury? If you did , I don't think he got it because if he had known what you know, he probably wouldn't have done that.

 

This is correct. They just sell more treasuries to get that cash. Believe it or not, there's still a large demand for safe debt given the mass flight to quality in the debt markets.

 

Demand for US treasuries is at an alltime high - there has never been a better time for the government to sell bonds. Hundreds of billlions are moving per month.

 

The Fed did NOT just print out $7.4 trillion. They are making the commitment to have that available.

And for the most part, the US markets are recognized as much safer investment havens compared to the European and other global markets. Besides the Yen, the dollar has been getting stronger while the other major global currencies are weakening. Foreign investors are buying US dollars and investing in the U.S.

 

One thing I can agree with from the article linked to by the OP.

Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Representative Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

 

This is extremely misleading. Take this for example:

The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.

That's more than half your total right there. $2.4 trillion in *short-term* debt that gets repaid within days or weeks and just accounts for time between revenues and expenses for businesses. Unless the entire country disappears, all of that gets paid back.

Then you have another $1.4 trillion in guarantees - no money was actually exchanged, and it would only have an actual cost if major banks start going under.

 

If the US govt is just coming in senior to everything, the bondholders and shareholders really will bear the brunt of the cost...basically every bondholder's claim to the top assets just got reduced by the US govt...but hey, that's what you should expect if you're going to run your company without proper risk management/stupid business practices...

 

Thanks for the clarification. I should have guessed that it was hysteria meant to urge a return to the gold standard. I do think the Fed needs to be controlled more by the Congress and the President. There also needs to be extraordinary steps taken to keep Treasury secretaries from personally profitting from government after they leave office. The possible conflicts of interest are just too obvious.

 

No it doesn't get paid back. (edit- just to clarify - it won't get paid back, unless credit start flowing like a river again)
Banks sell commercial credit with ease when credit bubbles are expanding.

It is more debt for the taxpayer.
It gets paid back at some point by taxpayers, unless the country goes bankrupt we become a third world nation and we write off our debt. (or visa versa the order doesn't matter)

 

That will never happen. The Fed is structured to keep politics out of monetary issues. Meanwhile, the govt is more focused on fiscal policy such as taxes.

 

You do realize that this article basically outlines why it's good for the government to be selling bonds now as yields are low and demand is high and really undercuts your theory right?

 

That's not really a good analogy, but anyway it was a good idea to take out a home equity loan interest rates were lower.

Taking out the same loan today leads you to pay far more over the term of the loan.

 

The risk reward scenario has treasuries artificially inflated and yielding next to nothing. For the first time ever the 2 year treasury yield is less than 1%!

This is excessive fear in the marketplace and a premium is placed on the safest asset in the world. If we're going to spend the money anyway (which i'm not all that comfortable with) might as well borrow cheap before the fear subsides and people realize that treasuries are yielding less than even muni bonds which are federally tax exempt !