Posted on 11/03/2010 9:05:38 AM PDT by TigerLikesRooster
Feldstein: Big Fed Easing Threatens Economic Recovery
Wednesday, 03 Nov 2010 09:22 AM
By: Forrest Jones
The Federal Reserve’s plans to buy possibly up to hundreds of billions in assets from the country’s banks — a move known as quantitative easing — carries much more risk and than potential for reward, says Harvard economics professor Martin Feldstein.
As many expect, the Fed will buy long-term government bonds held by banks, perhaps up to $1 trillion, thus pumping the same amount of cash into the economy in the process.
Expectations of such a move have lowered long-term interest rates, weakened the dollar, boosted global commodities prices and farm land as well as stock prices in the U.S. and overseas.
Nevertheless, with recovery will eventually come and with it, higher interest rates.
For those carrying hefty amounts of debt needing servicing, higher borrowing costs will cause pain.
“The greatest danger will then be to leveraged investors, including individuals who bought these assets with borrowed money and banks that hold long-term securities,” Feldstein writes in the Financial Times.
(Excerpt) Read more at moneynews.com ...
Does anyone actually listen to this guy anymore? Being from havrard makes you a mental midget.....
P!
Question: Where does the US Government get virtually all of the money used to buy up Treasury Bills and Bonds?
Answer: The Fed runs printing presses, as needed, to produce worthless fiat currency ... and ... the Bills and Bonds they buy.
I suppose some people feel he is worth listening to. Martin Feldstein was Chairman of President Reagan’s Council of Economic Advisors.
The Fed doesn’t have a printing press. But feel free to send me any of that worthless fiat currency you want to get rid of.
Largest holdings of Treasury debt as of June, 2010:
Taiwan: 130 billion
Hong Kong: 138 billion
Caribbean island banks: 160 billion
Brazil: 165 billion
OPEC: 226 billion
Insurance companies: 260 billion
Comm.banks,S&Ls, C.U.s: 274 billion
United Kingdom: 448 billion
State and local gov’ts: 535 billion
Pension funds: 644 billion
Mutual funds: 648 billion
Japan: 837 billion
China: 868 billion
Individuals, GSEs, broker dealers, bank trusts, estates, savings bonds, corporate and non-corporate businesses: , 1,266 billion
Federal Reserve: 5,345 billion
See it at ... http://www.rawstory.com/rs/2010/11/federal-reserve-print-billions-dollars-massive-shadow-stimulus/
That article is using some economic slang. “Printing money” is shorthand for what the Fed does. The author either assumes that you are familiar with Open Market operations or he doesn’t know himself.
When the Fed buys or sells Treasuries it is all done by electronic entry. There is no currency involved. What the Fed is doing is replacing illiquid T-bills on a bank’s books with liquid money. The plan is to get banks to make loans. Banks can’t loan the T-bills, they can loan the money. Critics of quantitative easing don’t think the plan is going to work, that it’s going to cause more asset bubbles, devalue the dollar, and make interest rates rise.
What could possibly go wrong? *SNORT*
Gold & Silver shot off like ROCKETS today. Mama like. :)
(I wonder what copper is doing...I have all those nickels, you know.)
(I wonder what copper is doing...I have all those nickels, you know.)
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