The FED decisions are even stupid or evil in any case they create another lethal bubble

Buying assets with money they create artificially is by definition a bubble and a lethal mistake as they create again artificial profits for banks and if I were the Chinese Treasury I would unload on the FED and run. Think for about a moment what kind of weird things are going on the US treasury issues bonds to raise funding and the FED raises their balance sheet with money they do not have to buy them – that’s insane – completely cooking books and people should be sentenced for that. Who ever has IRA with government bonds sell them as this is the best price you might get in decades. Foreigners having losses already on the currency as the Dollar dropped sharply on that announcement. This Rothschild driven central banks are acting insane in many ways as they just work for the benefit of banks but not Mainstreet.

Excerpt

‘Rambo Fed’ Will Buy Treasuries to Combat Crisis

By Scott Lanman

(Corrects size of Fed balance sheet in 14th paragraph.)

March 19 (Bloomberg) — By committing to buy Treasuries and double his purchases of mortgage debt, Federal Reserve Chairman Ben S. Bernanke signaled his determination to avoid a repeat of the Great Depression and his willingness to pump as much cash into the economy as needed to end the current crisis.

U.S. central bankers decided yesterday to buy as much as $300 billion of long-term Treasuries and more than double mortgage-debt purchases to $1.45 trillion, aiming to lower home- loan and other interest rates. The Fed kept its main rate at almost zero and may keep it there for an “extended” time.

The moves sparked the biggest drop in 10-year Treasury yields since 1962, rallies in the stock market and gold and a plunge in the dollar against the euro. Economist Richard Hoey said Bernanke has created the “Rambo Fed,” referring to the Sylvester Stallone character skilled with weapons.

“This is a very powerful and aggressive move,” Hoey, chief economist at Bank of New York Mellon Corp., said in an interview with Bloomberg Television. “One of the reasons I’ve been arguing we won’t have a depression is we’ve got a Fed chairman who understands the problem and is going to come with the right diagnosis and the right medicine.”

With the purchases of Treasuries and housing debt, Bernanke is effectively using the Fed’s powers to print money and aim it where he and other officials believe it will have the greatest impact in lowering borrowing costs.

Unanimous Decision

The Federal Open Market Committee’s decision was unanimous, indicating the agreement to start buying Treasuries quelled disputes over how the central bank should expand its balance sheet. Richmond Fed President Jeffrey Lacker and others favored government-debt purchases instead of intervening in credit markets, as Bernanke has pioneered in the past six months.

Bernanke has studied the Great Depression extensively and published a book of his papers on the subject in 2000. In 1929, the Fed was “essentially leaderless and lacking in expertise,” Bernanke said in a November 2002 speech. The situation led to decisions that were associated with a “massive collapse of money, prices, and output,” he said.

Yesterday’s decisions will add $750 billion in purchases this year of mortgage-backed securities issued by government- sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae, for a total of $1.25 trillion. The Fed has already announced $217.1 billion in net purchases out of $500 billion planned through June, under a program unveiled in November.

The central bank will also double to as much as $200 billion this year its planned purchases of debt issued by Fannie Mae, Freddie Mac and Federal Home Loan Banks. The Fed bought $44.4 billion of the so-called agency debt as of March 11.

Jumpstart Lending

The $1 trillion Term Asset-Backed Securities Loan Facility, which is opening this week to jumpstart consumer and business lending, “is likely to be expanded to include other financial assets,” the FOMC statement said, without elaborating.

The Obama administration is considering melding the Treasury’s plan to set up private investment funds to buy frozen assets with the Fed program, known as the TALF, people familiar with the matter said. Treasury Secretary Timothy Geithner may make an announcement as soon as this week, after his first unveiling of the strategy caused a sell-off in financial stocks.

“This is not really a victory for Lacker,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “Lacker seems to be arguing for Treasury purchases instead of targeted programs. They are instead supplementing the targeted programs. They are just using all tools.”

Double Balance Sheet

The New York Fed will concentrate Treasury purchases among two- and 10-year securities. The transactions will take place two to three times a week, and the Fed may also buy other maturity Treasuries and Treasury Inflation-Protected Securities, according to a New York Fed statement.

The moves may more than double the Fed’s balance-sheet assets by September to $4.5 trillion from $1.9 trillion, said John Ryding, founder of RDQ Economics LLC in New York.

At the same time, the changes increase the danger, once the economy recovers, that the Fed won’t be able to unload the securities quickly enough to raise interest rates and counter inflation, said Ryding, a former Fed economist.

Bernanke floated the idea of buying Treasuries in a Dec. 1 speech. Then the FOMC said in its last statement on Jan. 28 that the Fed would be “prepared” for the purchases if “evolving circumstances” indicated their effectiveness.

Bank of England

The option gained ground after the Bank of England succeeded in lowering long-term rates by buying U.K. government bonds known as gilts in a program announced this month, said Lyle Gramley, a former Fed governor. The 10-year gilt yield slid to the lowest level in at least 20 years after the purchases began.

“Our objective is to improve the functioning of private credit markets so that people can borrow for all kinds of purposes,” Bernanke said at a Feb. 24 Senate hearing. “We are prepared, and we want to keep the option open to buy Treasury securities if we think that is the best way to improve the functioning or reduce interest rates in private markets.”

While Treasury yields fell, the strategy isn’t guaranteed to work in reducing other rates.

The Fed is “naive” if officials think the move will lower borrowing costs, said Doug Dachille, chief executive officer of New York-based First Principles Capital Management. The “historic precedent” of when the Treasury Department was buying back debt amid the budget surpluses of the Clinton administration show it may fail to do so, he said.

Advertisements

~ by behindthematrix on March 22, 2009.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: