November 25, 2008

Fed Admits Quantitative Easing

Fed Commits $800 Billion More to Unfreeze Lending (Update1): “The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.

The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.

“They’re trying to put funds into the system, trying to unfreeze these markets,” said William Poole, the former St. Louis Fed president, in an interview with Bloomberg Television. “Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.”

The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae, the statement said.”

Estimated U.S. GDP for 2008 is about $14.3 trillion (IMF). I mention that because today Federal Reserve announced a new facility and thereby all but admitting to a policy of quantitative easing. This puts the total amount of money pledged to various facilities and bailouts at about $8 trillion dollars… or 56% of GDP.

(You're children are going to hate you. They've been sold into debt slavery so you don't have to face the consequences of living beyond your means.)

Econompic Data goes into greater detail in Bailout Pledges More than $8 Trillion. This clearly means my Scary Fed Charts are going to get worse and the Federal Reserve Balance Sheet will continue to explode. Federal Receipts and Outlays have got to head in seriously opposite directions now. I’m talking the wrong way too, with outlays doing a moonshot while receipts go cliff diving.


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