March 27, 2011

A downright cheery little scenario

From Gonzalo Lira:
How Likely is QE-Three?
So back in September 2008�in the throes of the Global Financial Crisis�the Federal Reserve under its chairman, Ben Bernanke, unleashed what was then known as �Quantitative Easing�.

They basically printed money out of thin air�about $1.25 trillion�and used it to purchase the so-called �toxic assets� from all the banks up and down Wall Street which were about to keel over dead. The reason they were about to keel over dead was because the �toxic assets��mortgage backed securities and so on�were worth fractions of their nominal value. Very small fractions. All these banks were broke, because of their bad bets on these toxic assets. So in order to keep them from going broke�and thereby wrecking the world economy�the Fed payed 100 cents on the dollar for this crap.

In other words, the Fed saved Wall Street by printing money, and then giving it to them in exchange for bad paper.

Time passes, we move on.
Gonzalo goes on to talk about QE-2 where the Fed buys up the US Debt in the form of Treasury Bills. The money to pay for this? Being printed as we speak with nothing to back it up. No worries, just a little adjustment that will not effect the consumer -- here is just one sample of the effect:
Gonzalo then proposes that the Fed will probably proceed with either QE-3 or something else very dire. A good and sobering read -- we are in for a period of hyperinflation. The world would be a much better place had John Maynard Keynes not been born... Posted by DaveH at March 27, 2011 7:39 PM
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