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To: DannyTN

You’re dreaming, the Fed has done damage to multi-generations of Americans with policies that have destroyed the savers and capital formation not to mention the value of the currency. Wholesale destruction will commence as the Fed loses control and hyper-inflation will raise it’s deadly head.


18 posted on 06/22/2013 4:21:00 AM PDT by iopscusa (El Vaquero. (SC Lowcountry Cowboy))
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To: iopscusa; DannyTN
I agree with DannyTN. Once you get inside the numbers and see what is really happening with the Fed's moves in recent years you understand why things have played out the way they have.

Contrary to popular belief, inflation does not naturally result from a government that "prints money" on its own and inflates the money supply. Economic activity is a combination of both the supply and velocity of money. If I print a dollar and put it in my wallet, I have $1. If I use it to buy a newspaper at a newspaper stand, and the guy who runs that stand uses it to get a haircut, and the barber uses it to buy groceries, then we have $4 in activity from my original $1.

When the Fed engages in a massive program of buying mortgage-backed securities from banks and brokerage houses, it isn't really "creating money" at all. It is buying bonds that are backed by money that has already been created -- in many cases created years ago. Since many of these are non-performing mortgages in default or foreclosure, the purchase by the Fed is the only thing that gives them any value at all.

Without this intervention, the whole system would collapse. This is not to suggest that it was ever a good idea to write those mortgages in the first place, but once the loans were extended, there was no good way to unravel the mess that had been created.

26 posted on 06/22/2013 5:45:42 AM PDT by Alberta's Child ("I am the master of my fate ... I am the captain of my soul.")
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