Wednesday, March 18, 2009
The Federal Reserve announced today that they will join the central banks of England and Switzerland, printing money out of thin air to buy long-term government debt so as to keep interest rates low and boost lending in their ongoing attempt to revive an economy that is faltering badly due to an orgy of credit and debt a few years ago.
Apparently the gold market and currency markets have heard the news (the chart to the right will be updated as needed over the next hour or so)
Update #1 - from $925 to $932 complete @ 12 PM PST
Update #2 - from $932 to $947 complete @ 1 PM PST
The printing presses will be working 'round the clock to fund purchases of up to $300 billion in long-term Treasuries over the next six months which, in combination with an increase in purchases of mortgage backed securities and agency debt also announced today (an additional $850 billion total), should see the Fed's balance sheet swell to once unthinkable levels.
Lest anyone think that any of this is getting a bit out of control, the central bank also provided assuring words that they will keep an eye on the "size and composition" of their balance sheet in light of economic developments.
In what appeared to be just an afterthought, relegated to the third paragraph after occupying the top spot for years, the Fed also announced that short-term interest rates will be left at the freakishly low level of between zero and 0.25 percent and that they won't be going up anytime soon.
The policy statements from the last two meetings are shown below.
And if this doesn't work, we might just see the Fed's balance sheet hit that $10 trillion level that someone mentioned the other day.