Get ready to hear a new buzz word..."Quantitative easing" (aka debt monetization).

[roamer65]

With interest rate cuts not working, the Federal Reserve looks like it may borrow the policy that the Bank of Japan started in 2001. Basically, it is a fancy word for debt monetization. The Federal Reserve looks like it will have no choice but to inflate the money supply to try to end the credit crisis.

http://www.marketwatch.com/news/story/boas-levy-urges-fed-take/story.aspx?guid=%7B3062B495-D705-41FB-95E6-2F0863BB7EEA%7D&dist=msr_1

No wonder gold went up by $50+ yesterday.

[Zynx]

1. About time. There is literally just about zero inflation risk. The commodities bubble is dead and

burried. It is telling that the drop in commodities is nearly as severe year on year as the stock market and is roughly 60% from their all-time highs. That was a speculative bubble if there ever was one.

[CTyankee]

2. Canyou walk us through this process? So the gov't prints more money, then what?

Sorry to be so dense but my econ course in grad school didn't cover this (I was a Liberal Studies student, not an econ student).

[roamer65]

4. Basically... the Fed will convert just about any bond that they can get their hands on into cash.

[CTyankee]

10. you mean federal bonds?

State and municipal bonds? (I know I'm clueless...)

[msongs]

3. refer to this george carlin video about euphemisms ...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x243554

Msongs

[liberalmuse]

5. Thank you.

Because it is ever so more appropriate here.

[Dover]

6. Picking your poison - Hyperinflation vs. Deflation

This author's explanation of Deflation and Hyperinflation are helpful, though I disagree with his conclusion that we must go back to an old standard.

Perhaps the death of the dollar will lead to a new currency?

--


...Deflation and hyperinflation are different in form, but are identical in substance - two sides of the razor sharp edge of debt. On either side lies the abyss. Deflation destroys debt through defaults and bankruptcies, hyperinflation by debasement and loss of purchasing power.

Which fork in the road will the economy take? One thing is certain: the decision is no longer in the hands of the producers as it should be. It now rests with the financial sector - the bond market: the debt market. In paper fiat land we live and breathe and have our being in a world of debt.

History is replete with bouts of deflation and hyperinflation. One distinction that history shows, however, is that hyperinflation ends the life of a currency - it no longer is accepted as the medium of exchange. Although deflation is wrought with pain and suffering, defaults, bankruptcies, job losses, depressions, etc.; the currency is not destroyed. The slate of debt is wiped clean and the game begins anew. Deflation prolongs the life of the currency; hyperinflation destroys the currency. The first allows the game to continue. The second ends the game.

Bernanke and company have said that they will not allow deflation to occur. The only way to stop deflation or hyperinflation is to stop the inflation that comes first. Since the day the Fed was created it has repeatedly increased the supply of money. Subsequently, inflation has been baked into the cake.

If Bernanke holds true to his word then the Fed is going to attempt to stave off deflation by increasing the supply of money via inflation, which means further devaluation and loss of purchasing power for the U.S. dollar.

The Fed is going to try to walk the high wire act above the bottomless pit. The odds are against them winning such a dangerous game. Delicate balance and a deft touch are required. One wrong move can tip the scale in either direction.

Asset deflation is presently occurring. The Fed has responded by increasing their balance sheet 125%. There is more to come. Once the new credit plugs the hole in the dam of asset deflation - the increase supply building up will cause greater pressure until the dam finally bursts.

At the rate things are going a new cycle of excess credit creation will filter through the economy later in 2009, precipitating the final leg up of monetary inflation run out of control. Hyperinflation may be here by 2010. If and when it hits, the death of money will not be far behind. Steps need to be taken now - before it's too late. The clock is running out...con't

http://www.gold-eagle.com/editorials_08/gnazzo112108.html

[jody]

7. I'm constantly amazed how so many con artists can create new phrases to cover their crimes. n/t

[girl gone mad]

8. The Fed has been trying to inflate for at least 2 quarters..

but they've failed thus far. Debt is disappearing too fast to be replaced.

Remember, the Fed is a quasi-private institution. They have no interest in causing hyperinflation and I think that kind of talk is often counterproductive.

Quantitative Easing had ended in Japan by 2006. This policy only prolonged Japan's deflation. It also helped ignite the carry trade which is at the heart of Iceland's troubles, for one. Anyone pushing this sort of policy is making a fool's bargain.

[sam sarrha]

9. there is only one SANE way to totally pay off the National Debt in our lifetime

Create a "NATIONALIZED 1940's Manhattan Project" to become TOTALLY FREE OF OIL AS AN ENERGY SOURCE

SOLAR CAN PRODUCE ~70% OF DAYTIME ENERGY in units across the southern United States, CA to Texas

wind and conservation can fill in the rest, bio-fuels such as Hemp oil and

Algae http://www.cnn.com/2008/TECH/science/04/01/algae.oil/index.html
"snip...Kertz said he can produce about 100,000 gallons of algae oil a year per acre, compared to about 30 gallons per acre from corn; 50 gallons from soybeans...snip"

once the energy producing industry is NATIONALIZED we can cut the price a little then put all the rest of what would be profit for a handful of Robber Barron's into free education to compete in a world of cheap energy with the rest of the world we help with our system... and use all the rest to pay off the debt till its ZERO ..we need to be free of China before its too late,

TIME TO THROW OFF THE SLAVE CHAINS OF THE YELLOW RUNNING DOG CAPITALISTS..or watch our children starve to death in a dying planet

i worked in Refugee camps in 73' in West Africa during a climate shift there... i knew then it was simply a matter of time till i might see hundreds of dead bodies in the streets EVERY MORNING, RIGHT HERE

WAKE THE FUCK UP PEOPLE.. QUIT BEING BRAINWASHED capitalism isn't sacred except to the richest 1.8%, you don't have to believe everything other people think.. this is the best informed forum around..

but.... you'd don't have as much time as you might think.. get busy like your hair was on fire

[soothsayer]

11. They've already made $2 TRILLION in emergency loans. How much more liquidity

do we need?

snip
“The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

snip

Non-Borrowed Reserves of Depository Institutions (BOBNONBR) went from -$187.305 billion in September to -$332.750 billion in October. That is a 77.65% increase in just one month or a 931.82% annualized increase. That is also 2.4% of GDP (2007). In plain simple English: Banks are insolvent as a group. The money coming out of the ATM is money borrowed from the Fed. Currently, there is no evidence at all that the health of banks is improving.

Total Borrowing (BORROW) and Non-Borrowed Reserves (BOBNONBR) have clearly blown past each other as the ponzi scheme that was the US financial system finally and suddenly unraveled. This is EXACTLY what happened in Japan. This is EXACTLY how Japan ‘liquefied’ it’s overleveraged, overextended and insolvent banks. Creating the infamous Japanese ‘zombie’ banks resulted in deflation and economic stagnation that is now referred to as the Lost Decade.

Total Borrowings (BORROW) can be broken down into its various sources. Discount Window Borrowings of Depository Institutions from the Federal Reserve (DISCBORR) are one such source. Discount Window Borrows went from $140.291 billion in September to $403.541 billion in October. That is a 187.65% increase in just one month or a 2251.75% annualized increase. Interestingly enough, the discount window wasn’t really tapped until September, with borrowings in August only being $18.078 billion. Clearly, this is a new source of funds for financial firms and may have to do with the fact that Bernanke has removed the negative stigma of tapping the window. He has also made almost everybody and his mamma eligible. Collateral requirements have also been severely degraded to the point where a dead donkey would probably qualify.

much more at link
http://www.federalreserve.gov/releases/h41/Current/

Condition Statement of Federal Reserve Banks
Federal Reserve Statistical Release (13 Nov 2008)

Thanks to The King Report - As of Wednesday, the Fed holds $2.249 trillion of paper. This is an increase of $142.371 billion on the week and $1.3326 trillion year-to-year.
http://www.federalreserve.gov/releases/h41/Current/