Magox Posted March 18, 2009 Share Posted March 18, 2009 So the Federal Reserve today has committed over a Trillion dollars today to combat this slowdown that we are in. With the $700Billion bailout, $800 Billion Federal reserve committed last november to buy mortgage/consumer backed securities, $800Billion stimulus plan (what a laughable name to call it),$400 Billion omnibus speding pork bill, $650 Billion "down payment" on Health care reform, and now $1 Trillion dollar decision today, not to mention the bank bailout plan that Timothy Geithner will be unveiling soon(some say will cost over $1 Trillion) and the second stimulus that I'm sure will be recomended in the next twelve months. My question is How in the world are we ever going to pay back all this money? Higher taxes? Every dollar borrowed today, is a dollar that has to be payed back tomorrow. Are the chinese really going to want to keep buying our debt? Why would they? every dollar that we rack up more debt, endangers our ability to honor our commitment to our debtors. Pretty soon, investors will be rushing out of treasuries, the inflationary implications are disastrous, we will be stuck having to pay back the whole world Trillions of dollars at a higher interest rate, and puts us in danger of defaulting. I feel like I am the only one who see's this. I just don't get it. The government has created a massive increase in the monetary base, which means we are entering a massive inflation cycle. Inflation WILL be intractible. If all this newly created money does not cause inflation, it will be the FIRST TIME IN THE HISTORY of fiat money that inflation has not resulted. Why does it seem like I am the only one who see's this? below is an article from Bloomberg Fed to Buy $300 Billion of Longer-Term Treasuries March 18 (Bloomberg) -- The Federal Reserve plans to buy $300 billion in Treasury securities and acquire more mortgage and agency debt in an effort to bolster housing and hasten the end of the recession. “To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage- backed securities,” the Federal Open Market Committee said after a unanimous vote in Washington today. “Moreover, to help improve conditions in private credit markets, the committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.” Chairman Ben S. Bernanke is opening a new front in monetary policy after unemployment climbed to 8.1 percent and economists forecast the economy will shrink through the middle of the year. Fed officials also kept the benchmark interest rate at between zero and 0.25 percent and said it will consider expanding the Term Asset-Backed Securities Loan Facility to include “other financial assets,” the statement said. “We are not even close to the bottom and therefore the Fed is engaging in a massive quantitative easing,” William Poole, former president of the St. Louis Fed, said in an interview today with Bloomberg News. “We still have a very serious recession in front of us,” said Poole, now a senior economic adviser to Merk Investments LLC in Palo Alto, California, and contributor to Bloomberg News. Historic Rally Treasuries surged, sending benchmark 10-year note yields down to 2.50 percent from 3.01 percent late yesterday, the biggest decline since 1962. The Standard & Poor’s 500 Stock Index jumped 2.9 percent to 800.66 at 2:54 p.m. in New York. Bernanke is trying to prevent the credit contraction from deepening what already may be the worst recession in 60 years. The U.S. jobless rate jumped to the highest level in more than a quarter century last month. Industrial production fell 1.4 percent, the fourth consecutive decline, while factory capacity in use slumped to 70.9 percent, matching the lowest level on record. “Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract,” the FOMC said in the statement. “The committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.” Global Contraction The global economy will contract this year for the first time since World War II, the World Bank predicts, forcing central banks to keep pumping money into their economies when conventional interest rates are at, or close to, zero. The Bank of England is buying government bonds and corporate debt, the Bank of Japan is snapping up government notes and making subordinated loans to banks, and the Swiss National Bank is intervening to weaken the franc. The Fed has cut the benchmark rate from 5.25 percent, beginning in September 2007, as credit froze and the economy buckled. Policy makers are now focused on how to further channel money to the economy. The Fed has already committed to buying $600 billion of mortgage-backed securities and bonds sold by government-sponsored housing agencies. Home-Loan Rates The Fed’s actions pushed the average rate on a U.S. 30-year fixed rate mortgage to 5.03 percent on March 12, down from 5.15 percent the previous week. Still, rates are high relative to benchmark Treasury issues: Prior to today’s meeting, the difference between rates on 30-year fixed mortgages and 10-year Treasuries is 2.1 percentage points, Bloomberg data show. That’s up from an average of 1.75 percentage points in the decade before the subprime mortgage market collapsed. Through emergency loans and liquidity backstops, U.S. central bankers have expanded Fed credit to the economy by an unprecedented $1 trillion over the past year. At the same time, forecasters at Macroeconomic Advisers LLC in St. Louis predict a 5.2 percent decline in first-quarter gross domestic product, following a 6.2 percent drop in the fourth quarter. ‘Choked Off’ “It is the worst credit crunch since the Great Depression,” Laurence Meyer, a former Fed governor and vice chairman of Macroeconomic Advisers, said before the decision. “The banking system is reeling, credit is being choked off, it is dramatic in size.” Banks worldwide have posted $1.2 trillion in write downs and credit losses on mortgage loans and other assets. U.S. Treasury officials will put the largest 19 banks through “stress tests” and decide whether they need more capital. The banks can raise equity privately or seek more government funds. Officials are also looking at ways to remove bad assets. Bernanke, 55, told CBS Corp.’s “60 Minutes” on March 15 that he sees “green shoots” in some financial markets, and that the pace of economic decline “will begin to moderate.” The Standard and Poor’s 500 index is up 11.5 percent this month. Chief executive officers from Bank of America Corp., JPMorgan Chase & Co., and Citigroup Inc. said their banks made money in the first two months of the year. Coca-Cola Co., health insurer WellPoint Inc. and more than 30 other companies are tapping longer-term credit markets and paying down their short-term IOUs, a sign of some investor confidence. Retail Sales Sales at U.S. retailers in February fell less than forecast and a gain in January exceeded the previous estimate, indicating the biggest part of the economy may be starting to stabilize. Housing starts in the U.S. unexpectedly snapped the longest streak of declines in 18 years in February, adding to the series of data that suggest the pace of the economy’s decline may be easing. Consumer prices rose 0.4 percent in February from a month earlier, the Commerce Department reported today. The annual core inflation rate increased to 1.8 percent, within the range most Fed officials say is their objective, easing concern about a deflationary spiral. “There are always going to be some signs of revival; this is a resilient country,” said Julian Mann, who helps manage $4 billion in bonds at First Pacific Advisors LLC in Los Angeles. “But consumers are fearful, and when they are fearful they aren’t going to spend.” Link to comment Share on other sites More sharing options...
Cugalabanza Posted March 18, 2009 Share Posted March 18, 2009 "Rarely is the question asked, is our children learning?" Link to comment Share on other sites More sharing options...
John Adams Posted March 18, 2009 Share Posted March 18, 2009 I feel like I am the only one who see's this. You need to read more. And work on your grammar. Link to comment Share on other sites More sharing options...
ricojes Posted March 18, 2009 Share Posted March 18, 2009 Is there enough trees to print all this money? Since were going to pick on grammar, I'll pile on. Money is not made from paper, it is a cotton and linen blend, with red and blue minute silk fibers running through it. No trees are harmed..... And I do agree with you, just being a wise @$$. Link to comment Share on other sites More sharing options...
Magox Posted March 18, 2009 Author Share Posted March 18, 2009 You need to read more. And work on your grammar. I have no idea what your talking about. All I know is that this country is putting itself in danger. Anyone who doesn't see this, either doesn't understand economics, or is turning a blind eye. But thanks for pointing out my grammar flaws, I will get right to it, professor B. Link to comment Share on other sites More sharing options...
Magox Posted March 18, 2009 Author Share Posted March 18, 2009 Since were going to pick on grammar, I'll pile on. Money is not made from paper, it is a cotton and linen blend, with red and blue minute silk fibers running through it. No trees are harmed..... actually to get technical, all this money that is being created, not even %1 will ever be printed. It is all electronic. Link to comment Share on other sites More sharing options...
ricojes Posted March 18, 2009 Share Posted March 18, 2009 actually to get technical, all this money that is being created, not even %1 will ever be printed. It is all electronic. There you go, yet another mistake you made... Just kidding dude. I do agree. It's scary and I have no faith in the powers that be... Link to comment Share on other sites More sharing options...
Nervous Guy Posted March 18, 2009 Share Posted March 18, 2009 All I know is that this country is putting itself in danger. Anyone who doesn't see this, either doesn't understand economics, or is turning a blind eye. I can't think about that right now. If I do, I'll go crazy. I'll think about that tomorrow. Link to comment Share on other sites More sharing options...
/dev/null Posted March 18, 2009 Share Posted March 18, 2009 Why would we have to even print new money? With computers all we have to do these days is tell the computer we have an additional $787 Billion. But don't try this at home. When we do it, it's a crime. When the government does it, it's called a stimulus Link to comment Share on other sites More sharing options...
DC Tom Posted March 18, 2009 Share Posted March 18, 2009 I have no idea what your talking about. All I know is that this country is putting itself in danger. Anyone who doesn't see this, either doesn't understand economics, or is turning a blind eye. But thanks for pointing out my grammar flaws, I will get right to it, professor B. And the country's been doing it for thirty years. This isn't really a new development. Link to comment Share on other sites More sharing options...
Magox Posted March 18, 2009 Author Share Posted March 18, 2009 And the country's been doing it for thirty years. This isn't really a new development. Yes we have, but not to this degree. Never has the expansion of the Fed's balance sheet grown or should I say exploded at this pace. If you are an investor, and you view this as "business as usual" and don't take measures by readjusting your portfolio, then you will continue to get scorched, if you all ready havn't. I got one word for you Gold Link to comment Share on other sites More sharing options...
The Big Cat Posted March 18, 2009 Share Posted March 18, 2009 I have no idea what your talking about. All I know is that this country is putting itself in danger. Anyone who doesn't see this, either doesn't understand economics, or is turning a blind eye. But thanks for pointing out my grammar flaws, I will get right to it, professor B. You mean "what YOU'RE talking about." Tisk tisk. Link to comment Share on other sites More sharing options...
Magox Posted March 18, 2009 Author Share Posted March 18, 2009 You mean "what YOU'RE talking about." Tisk tisk. tuff crowd Link to comment Share on other sites More sharing options...
UConn James Posted March 18, 2009 Share Posted March 18, 2009 How in the world are we ever going to pay back all this money? Higher taxes? Every dollar borrowed today, is a dollar that has to be payed back tomorrow. Umm... I think you mean, "... is $4 that has to be paid back tomorrow." (Unless you know someone who lends at 0%.) Link to comment Share on other sites More sharing options...
The Poojer Posted March 18, 2009 Share Posted March 18, 2009 and really now, isn't it 'tsk tsk'? You mean "what YOU'RE talking about." Tisk tisk. Link to comment Share on other sites More sharing options...
KD in CA Posted March 18, 2009 Share Posted March 18, 2009 it is a cotton and linen blend, with red and blue minute silk fibers running through it Sounds like a pair of golf pants I have. Too bad they can't bailout my short game. Link to comment Share on other sites More sharing options...
Magox Posted March 18, 2009 Author Share Posted March 18, 2009 Umm... I think you mean, "... is a $4 that has to be paid back tomorrow." (Unless you know someone who lends at 0%.) Absolutely. We are putting ourselves into debt, not just on a national but a personal household level. We don't create things anymore. Our Economy's growth doesn't depend on production, it rely's on credit extension. The more we buy, the more our economy grows, which in turn puts us heavier into debt. I find it Ironic, that what was largely responsable for putting us into this mess, was irresponsable lending and borrowing. We leveraged ourselves to the tilt, and when the Sh*t hit the fan, the buyers dryed up and as a result, we have found ourselves in this deflationary whirlwind. So what we are doing now to get us out of this mess, is we are now going to print more money and buy more U.S debt with the money we printed. WTF don't let them fool you. they call it "quantitative easing" The Japanese adopted it in the 1990's ya that worked really well for them didn't it? so, I guess the thinking is, since it didn't work for the Japanese, it will work with us. Two words Zombie banks that is the plan. recapitalize a bank who had bad lending practices and 0 risk management. Give them money, so they stay alive, but never will have the confidence to lend again. Just like a zombie, alive, but not really. On top of it all, the irresponsable lenders, who helped create this mess, not just with the lax lending, but the wreckless, insane OTC derivative markets (mortgage back securities) that were 30 times leveraged, we are going to Recapitalize these banks with Hundreds of Billions possibly Trillions of dollars (and produce in effect zombie banks) and now force them to lend AGAIN, in an economic environment worse today than what it was before. So in effect. 1)Irresponsable lending and borrowing is largely responsable for where we are today. 2)Now we will recapitalize these banks that should of gone under and give them a second chance. 3)Bail out lots of irresponsable borrowers with the housing forclosure plan. 4)Force banks to lend AGAIN in a worse economic environment today than before It's a vicious cycle What they should do, is Nationalize the banks, or if you prefer to use another word, take them into "temporary receivership", break them off and sell all their healthy assets and deposits to stronger regional banks who practiced better risk management. Reward the good banks. Then pool all the toxic assets into a "bad bank" and play the waiting game. With time, these assets will rise in value, and the American taxpayer will be able to recoup a good portion of what was invested. Link to comment Share on other sites More sharing options...
John Adams Posted March 19, 2009 Share Posted March 19, 2009 I back this post to the tilt. Link to comment Share on other sites More sharing options...
drinkTHEkoolaid Posted March 19, 2009 Share Posted March 19, 2009 this is a terrible idea. Link to comment Share on other sites More sharing options...
Captain Hindsight Posted March 19, 2009 Share Posted March 19, 2009 Dont worry America has a plan.... Were gonna give Billions of Dollars to men that just lost Billions of Dollars..... What could possibly go wrong? Link to comment Share on other sites More sharing options...
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