Another $1 trillion-plus: Fed starts cranking the printing presses double-time

Spending bills in Congress get far more attention–and opposition–than Federal Reserve Bank decisions about expanding the Fed’s lending, but they both put the American public on the hook ultimately. And on Wednesday, the Fed announced plans to expand its balance sheet dramatically by pumping another $750 billion into mortgage-backed securities and $300 billion into purchasing long-term Treasuries (WSJ, NYT).

The latter move is one the Fed has been fretting over for some time, since it was first broached publicly in a December 1, 2008 speech by Fed chair Ben Bernanke. In effect it’s a pure money-printing action, and it’s already caused the dollar to drop in value. In itself that’s not a bad thing, at least as far the U.S.’s mammoth trade deficit is concerned. But the decision is sure to add to the chorus of critics at home and abroad who claim that the government’s attempted cure for today’s deflationary pressures will result in a crippling bout of inflation tomorrow. 

The Fed’s balance sheet–its outstanding loans, that is–has more than doubled since the onset of the financial crisis last fall. Back then, it stood at about $900 billion. Now it’s $2.1 trillion, and that’s to say nothing of programs like TALF, which the Fed hopes to use to target up to an additional $1 trillion to specific sectors such as the auto industry, credit cards, and education and small business loans. Bloomberg’s Scott Lanman writes that the total could more than double by September, to the vicinity of $4.5 trillion.  

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Comments (2)

  1. Submitted by Glenn Mesaros on 03/20/2009 - 03:58 pm.

    These actions put us on the edge of a hyperinflationary takeoff, like that of Weimar Germany in 1923. The pumping of money by Bernanke is part of a British operation to sink the United States. Anyone who continues this thing is a traitor to our nation, whether they are witting, or not.

    The printing of funds to purchase up to $750 billion of Mortgage-Backed Securities will be purchased at rates far above their actual, present value.

    This means that the total funds allocated by the Fed and the Treasury since the acceleration of the crisis into high gear in mid-September 2008 is $11.4 trillion. While “only” $2.8 trillion has been spent so far, this first tranche spent is believed to have contributed to the .4% official increase in inflation reported for February.

    Watch Larouche webcast at 12 noon on Saturday, March 21 to expose these swindlers in the same way that former NY Governor Eliot Spitzer recently did.

  2. Submitted by Brenda Bowers on 03/21/2009 - 08:10 pm.

    Mr. Perry, I just wanted to thank you for writing on a level that even I can understand. Too many economic analyst become so technical they lose me. So what I have been doing is visiting your site and then taking the information back to my site and blogging in my own words. (I do of course refer back to you.) I haven’t done this to pass myself off as an economist by any means, but to give factual information to enforce my own opinions on the political scene. Have gotten comments and emails thanking me for making all that “stuff” understandable! The thanks should go to you. Brenda Bowers

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